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Practical  Bookkeeping 
and  Accounting 


A  System  of  Modern  Bookkeeping  and  Accounting 

Logically    Developed,    with    Forms    and    Statements 

Amply  Illustrated 


Accounting  is  Introduced  and  Developed  in  its 
Natural  Place  and  Order 


CONTAINS 
A  SYSTEM  OF  ACCOUNTS 
FOR  RETAIL  MERCHANTS 


Especially  Adapted  to  the  Work  in  all  Schools  that  Teach  Bookkeeping 

and    Accounting,    in    that    both    the   -Bookkeeping    and     the 

Accounting  are  Presented  by  Easy  and  Natural  Steps 


BY 

WILLIAM  L.  MUSICK 

Assisted  by  Commercial  Teachers  and  Public  Accountants 


SCRIPT  BY  BA1TZER 

UNIVERSAL  TEXT  BOOK  COMPANY 

CHICAGO,  ILLINOIS 


H  Ft.  - 


Practical  Bookkeeping  and  Accounting 


CHAPTEE  I.     Principles  of  Debit  and 
Credit  Affecting  Accounts.    A  Study 
of  the  Journal  Entry  and  Ledger  Ac- 
I  s.     I  llustrated 1 

CHAPTEB  It.  Business  of  W.  .1.  Good- 
now,  Sole  Proprietor.  Journal,  Ledger, 
Trial  Balance,  Balance  Sheet,  Profit 
and  Loss  Statement;  and  Closing  En- 
tries.   Amply  Illustrated 13 

CHAPTEB  III.  Business  of  W.  J.  Em- 
erson, Sole  Proprietor.  Similar  to 
Chapter  [I,  but  not  Illustrated.  Notes 
Receivable  and  Notes  Payable  Book 
Added.  Incoming  and  Outgoing  Busi- 
ness Papers  May  Be  Used 45 

TRIAL  BALANCE,  Working  Sheet,  Ad 
justing   Journal    Entries,   and    Profit 
and    Less   Statement,   Showing   Nee 
Operating  Income  and  Non  Operating 
Expenses.    Problem  Solved 52 

CHAPTEB  IV.  Business  of  D.  L.  Mor 
risen  &  Co.  A  Partnership.  Books  of 
Original  Entry.  Purchases  Book, 
Sales  Book,  Cash  Book  and  .Journal 
Am-  \'*,-,\.    All  Aie  Amply  Illustrated.  55 

BAI.  \NC'K  SIIF.KT:  Arrangement  of 
Assets  and    Liabilities.      Different     \i 

rangement  as  to  Available  Assets 
Compared B8 

CHAPTEB  V.  Business  of  W.  .1.  Emer 
sen  &  Co.  Wholesale.  A  Partnership. 
A  Continuation  of  the  Business  of  W. 

.1.    Emerson,  Chapter    III.      A    Partner 

Being  Admitted.  Books  of  Original 
Entry,  the  same  as  in  Chapter  IV. 
Incoming     and     Outgoing     Business 

Paper     Ma'.    Be   I'sed 01 


PARTNFlisIIlP  ACCOUNTING:  Open 
ing  Entries,  and  Closing  Entries. 
Division  of  Profits:  Equallyj  Accord- 
ing to  Investments:  Averagi  [l 
meiit;  Interest  en  Investments;  Calcu- 
lation of  Interest  .  Gt       Will mi 

TBIAL  BALANCE,  Working  Sheet, 
Balance  Sheet  and  Profit  and  Loss 
statement  I'm  a  Corporation.  Problem 
Sol   ed 113 

CHAPTEB  VI.  Business  of  the  Empire 
Grocer  Co.  A  Corporation.  Book 
Original  Entry:  Purchases  Book, 
Sales  Book,  Special  Column  Cash 
Book,  Special  Column  Journal,  and 
Petty  Cash  Beek.  Controlling  Ac 
counts.    Amply  Illustrated 119 

CORPORATION  ACCOUNTING:  Open- 
ing Entries  and  Closing  Entries.  Sub 
scriptions;  Capital  stock:  Common 
Stock;  Preferred  Stock;  Treasury 
ste.k;  Unsubscribed  stock:  Install- 
ment Scrip;  stock  at  Premium;  stock 
at  Discount;  stock  Menus;  Underwrit- 
ing Expense;  Changing  to  Corpi 
tion;  Consolidation;  Good  Will Mil 

i  II  \PTKi;  VII.    Special  Column  Jour 

nal.       Cash    Journal.       Forms    Ainph 
Illustrated.      Adapted    for   a    Trading 

Bus -     May  Be  Adapted  for  a  Non- 

t  rading  Business 158 

CHAPTEB  VIII.    A  System  of  A, ants 

for      Retail      Merchants.     Turnover. 
i  ontrolling  Accounts,  ami  Petty  Cash 

Book.       Tickets:        Charge       Tickets; 

Cash  Tickets;  Credit  Tickets;  Collcc 
tion  Tit  kets.     All  Amply  Illustrated,  .lfi-: 


BOOKKEEPING  AND  ACCOUNTING 


r  IGES 

CHAPTER  IX.  Business  of  Central 
Foundry  Co.  A  Manufacturing  Busi- 
ness. Special  Column  Purchases  Book; 
Special  Column  Sales  Book;  Special 
Column  Cash  Book  with  Bank  Columns; 
Petty  Cash  Book.  Forms  Arc  Amply 
Illustrated 192 

SINGLE  ENTRY  BOOKKEEPING: 
Single  Entry  Journal;  Statement  of 
the  Business;  Proprietor's  Profit  Cred- 
ited; Entry  Changing  Books  to  Double 
Entry 205 


PACKS 

CHAPTER  X.  Cost  Accounting,  Part  I. 
A  Method  of  Ascertaining  the  Unit 
Cost  of  an  Article  from  the  Trial  Bal- 
ance, Where  a  System  of  Cost  Ac- 
counting Is  Not  Being  Used.  A  Prob- 
lem Solved 2(  i;i 

COST  ACCOUNTING,  PART  II.  Cost 
Accounting  Forms  Illustrated,  with 
Propositions,  Solutions  and  Explana- 
tions. An  Introduction  to  Cost  Ac- 
counting. Contains  a  Short  Manufac- 
turing Set,  Showing  the  Manufactur- 
ing Accounts  as  Controlling  Accounts 
of  the  Factory  Operations 214 


Copyright   1921 
By   Universal   Text  Book   Company 


:  ■ 


PREFACE 

The  simplest  way  to  teach  or  to  learn  any  subjecl  is  to  commence  at  the  be- 
ginning, and  take  each  step  in  Logical  order.     In  bookkeeping,  start  with  the 

transaction.  The  next  step  is  t lie  journal  entry  to  record  the  transaction.  The 
journal  entry  is  the  basis  of  every  entry  in  any  hook  of  original  entry.  The 
tirst  reei  i'd  nf  every  transaction  is  a  journal  entry  or  its  equivalent.  The 
Ledger  A  icounl  is  the  record  of  final  entries,  the  end  of  the  transactions  so 
far  as  bookkeeping  is  concerned.  Hence,  the  logical  development  must  begin 
with  the  journal  entry  and  develop  toward  the  Ledger  account  as  the  final 
record  in  the  routine  of  bookkeeping,  terminating  in  the  Trial  Balance. 

Accounting  is  the  auditing  of  the  bookkeeping  to  determine  the  correctness 
of  it.  the  preparation  of  the  Balance  Sheet  and  Profil  and  Loss  Statement,  the 
closing  of  the  hooks  to  correspond  with  these  statements,  the  preparing  id' 
analysis  sheets  or  detailed  statements,  schedules  and  comparative  statements 
I'm-  the  in  In  i-ii  Kit  ion  nf  the  management  of  the  business. 

There  are  two  sides  to  every  question,  and,  if  only  one  side  is  considered 
and  the  other  side  ignored,  the  idea  i>  hazy  and  incomplete.  This  is  notable  in 
every  argument  of  a  question.  There  are  two  sides  to  every  business  transac- 
tion, and  if  both  sides  are  i sidered  at  the  same  time,  the  idea   i--  clear  ami 

complete.  The  journal  entry  of  a  transaction  considers  both  sides,  and  the 
idea   is  complete  in  the  mind  and   the  record  is  complete  in  the  books. 

Carrying  out  this  plan  of  logical  development  by  easy  steps,  and  securing 

the  complete  idea  for  each  step  before  the  next  step  is  taken,  not  only  the 
routine  of  bookkeeping  is  made  easy  to  learn,  but  the  elements  of  accounting 
are  introduced  in  the  natural  place  anil  order,  and  are  made  as  easy  to  learn 
ami   to  teach  as  the  routine  of  bookkeeping. 

TI1K  AUTHOR. 


CHAPTER  I 


PRINCIPLES  OF  DEBIT  AND  CREDIT  AFFECTING  ACCOUNTS 

1.  It  is  a  fundamental  principle  of  bookkeeping  to  "Debit  what  is  received 
ur  bought,"  and  to  "Credit  what  is  sold  or  given  out."  Any  kind  of  goods  a 
merchant  buys  and  sells  for  profit  is  called  "Merchandise." 

Debit  "Merchandise"  when  received,  and  credit  "Merchandise"  when 
sold.     Debit  "Cash"  when  received,  and  credit  "Cash"  when  paid  out. 

Jan.  1.    Bought  25  brls.  H.  Apples  @  $5.25,  for  cash. 

In  this  transaction,  "Merchandise"  is  received,  and  "Cash"  is  paid  out. 
The  entry  to  record  this  transaction  is  as  follows: 


ILLUSTRATION  NO.  1.   A  JOURNAL  ENTRY 


Debit  "Merchandise"  by  placing  the  amount  $131.25  in  the  left  hand  or 
debit  column,  and  writing  the  word  "Merchandise"  well  to  the  left.  Credit 
"Cash"  by  placing  the  amount  paid  out,  $131.25,  in  the  right-hand  or  credit 
column,  and  writing  the  word  "Cash"  slightly  to  the  right  of  Merchandise. 

The  above  entry  is  a  journal  entry,  and  the  book  in  which  such  entries  are 
recorded  is  called  a  Journal.  The  heading  of  each  column  shows  for  what  each 
column  is  used. 

Jan.  5.    Sold  15  brls.  H.  Apples  (5  $5.75,  for  cash. 

"Cash"  is  received,  and  "Merchandise"  is  sold.  Just  the  opposite  of  the 
preceding  transaction.  Debit  "Cash"  because  cash  is  received.  Credit  "Mer- 
chandise" because  it  is  sold. 

Debit  Credit 


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ILLUSTRATION  NO,   -' 

Debit  Cash  by  placing  the  amount  received,  $86.25,  in  the  debit  column, 
and  writing  the  word  "Cash"  well  to  the  left.  Credit  "Merchandise"  by  plac- 
ing the  amount  sold.  $S6.25,  in  the  credit  column,  and  writing  the  word  "Mer- 
chandise" slightly  to  the  right  of  the  word  "Cash." 

The  purpose  of  a  journal  entry  for  each  transaction  is  to  arrange  the  debits 
and  credits  in  a  convenient  form  to  be  transferred  later  to  the  Ledger  ac- 
counts. After  the  first  journal  entry,  the  date  of  each  entry  following  is  placed 
in  the  middle  of  the  page  as  shown  in  this  last  entry. 

1 


2  BOOKKEEPING  AND  ACCOUNTING 

As  a  proper  method  of  study,  the  studenl  should  use  journal  ruled  paper 
and  prepare  these  journal  entries  in  the  order  they  are  given.  The  ael  of 
writing  them  while  studying  them  is  a  great  help  in  learning  the  principles. 

2.  It  is  a  fundamental  principle  of  bookkeeping  to  "Credil  persons  or  firms 
when  we  owe  them."  and  to  "Debil  them  when  we  pay  them."  If  we  owe  a 
person  or  firm,  we  credil  the  name  of  thai  person  or  firm  for  the  amount. 

Jan.  H».    Bought  of  Davis  Bros.  25  brls.  G.  Flour  (§  $8.75,  on  account 

"On  account"  moans  the  goods  were  not  paid  for  at  the  time  of  purchase, 
therefore,  we  owe  Davis  Bros.  $218.75.  Debil  "Merchandise"  $218.75,  be- 
cause it  is  received.  Credil  Davis  Bros.  $218.75,  because  we  owe  them  this 
amount. 


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ILLUSTRATION  NO.  3 


'■->.  Another  genera]  principle  of  bookkeeping  is  to  "Debit  persons  or  firms 
when  they  owe  us,"  and  to  "Credit  them  when  they  pay."  If  a  person  or 
Brm  owes  us.  wo  debit  the  uame  of  thai  person  or  firm  for  the  amount. 


Jan.  15.    Sold  to  W.  II.  Mas, 


.1  brls.  <;.  Flour  («   $ll._->,  on  account. 


W.  II.  .Mason  owes  us  $168.75,  because  he  did  nol  pay  for  the  goods  at  the 
time.  Merchandise  of  the  value  of  $168.75  is  sold.  Debit  W.  II  Mason  $liis.7.">. 
because  he  owos  us  this  amount.  Credil  "Merchandise"'  $168.75,  because  it 
is  sold. 


Debil 


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ILLUSTRATION   NO.   1 


Observe  that  the  same  amount  is  placed  in  the  debit  and  credit  column. 
This  moans  that  each  journal  entry  is  in  "balance."  When  an  account  is 
debited,  some  other  accounl  is  credited  for  an  equal  amount.  Also  note  thai 
each  .journal  entry  states  all  the  facts  of  the  transaction. 

A  full  explanation  should  be  written  in  the  "Explanation  Column.*'  yet 
this  explanation  should  be  as  brief  as  possible.  "Mdse."  may  be  used  for  mer 
chandise;  a  e  for  account:  Dis.  for  discount-,  ace.  for  acceptance;  Bot.  for 
bought;  a  e  Pay.  or  Accts.  Pay.  for  Accounts  Payable;  a  c  Rec.  or  Accts 
Rec.  for  Accounts  Receivable;  Notes  Rec.  for  \otes  Receivable;  Notes  Paj 
for  Notes  Payable;  cs.  for  cases;  bx.  for  bos  or  boxes;  pr.  for  pair:  lb.  for 
pounds;  brls.  for  barrels,  bul  abbreviate  only  when  necessary. 

4.  A  journal  entry  may  have  two  or  more  debits  and  two  or  more  credits, 
but   the  total   in  the  debil   column  must  equal  the  total  in  the  credit   column. 


BOOKKEEPING  AND  ACCOUNTING 


It  is  a  principle  of  bookkeeping  that  "When  an  account  (or  accounts)  is 
debited,  some  other  account  (or  accounts)  must  be  credited  for  the  same  or 
an  equal  amount." 

Jan.  20.  Bought  of  Davis  Bros.  50  cs.  M.  &  J.  Coffee  @  $5.17.    Paid  them 
$125.    Balance  on  account. 

Debit  "Merchandise"  $258.50,  because  this  amount  is  received.  Credit 
Cash  $125,  because  this  amount  is  paid  out.  Credit  Davis  Bros.  $133.50, 
because  we  owe  them  this  amount.     One  debit  and  two  credits. 

Debit  Credit 

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ILLUSTRATION  NO.   D 

Observe  that  the  total  of  the  credit  column  is  equal  to  the  amount  in  the 
debit  column.  This  must  be  true  of  every  journal  entry.  There  may  be  any 
number  of  debits  and  any  number  of  credits,  but  the  total  of  each  column 
must  be  the  same. 

Jan.  25.     Sold  to  W.  H.  Mason  25  cs.  M.  &  J.  Coffee  @  $5.70.    Received 
cash,  $75.    Balance  on  account. 

Debit  Cash  $75,  because  cash  is  received.  Debit  W.  II.  Mason  $67.50,  be- 
cause he  owes  us  this  amount.  Credit  "Merchandise"  $142.50  because  it  is 
sold.     Two  debits  and  one  credit. 

Debit  Credit 

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ILLUSTRATION  NO.  0 

In  each  transaction,  decide  what  is  the  debit  (or  debits),  and  what  is  the 
credit  (or  credits),  and  prove  that  the  total  debits  are  equal  to  the  total  of 
the  credits,  before  recording  the  entry.  Use  one  line  between  each  journal 
entry  for  the  date,  which  is  written  in  the  middle  of  the  page. 

5.  "Debit  persons  or  firms  when  they  owe  us,"  and  "Credit  them  when 
they  pay."  Persons  and  firms  to  whom  we  sell  goods  are  "Customers."  If 
we  debit  a  person  for  all  he  owes  us,  and  credit  him  for  what  he  pays,  the 
difference  between  the  total  debits  and  the  total  credits  is  the  balance  that 
he  owes. 

Jan.  27.     Received  $115  from  W.  II.  Mason  to  apply  on  account. 

Debit  Cash  $115,  because  cash  is  received.  Credit  W.  II.  Mason  $115. 
because  he  has  paid  part  of  what  he  owes  on  his  account. 

Debit  Credit 


ILLUSTRATION  NO.   7 


4  BOOKKEEPING  AND  Al  I  OUNTING 

ii.  "Credil  persons  or  linns  when  we  owe  them,"  and  "Debil  them  when 

we  pay  them."     Persons  or  linns  from  whom  we  buy  g Is  are  "Creditors." 

Ii  we  credil  a  person  for  all  we  owe  him.  ami  debil  him  for  whal  we  pay  him. 
the  difference  between  the  total  of  the  debits  ami  the  total  <>t'  the  credits  is 
the  balance  thai  we  owe  him. 

Jan.  28.     Paid  Davis  Bros.  $172.50,  on  account. 

Debit   Davis  Bros.  $172.50,  because  we  have  paid  them  pari  of  what   we 
owe  them  mi  our  account.    Credil  Cash  $172.50,  because  cash  is  paid  out. 

Debil  Credil 


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ILLUSTRATION    NO.   8 

7.  Having  learned  the  reasons  for  the  debits  and  credits  in  the  foregoing 
journal  entries  for  the  transactions,  the  next  step  is  to  transfer  these  debits 
and  credits  to  the  Ledger  accounts,  which  is  called  "Posting."  Before  posl 
ini;  these  debits  and  credits  to  the  Ledger  Accounts,  we  will  study  the 
"Proprietor's"  account,  called  "Capital"  account.  The  proprietor  is  the 
owner  of  the  business.  II'  there  are  two  or  more  owners  or  proprietors,  the 
business  is  a  partnership,  and  each  partner  should  have  a  "Capital"  account. 
The  'Capital"  account  is  kept  to  show  the  "Proprietor's"  or  each  partner's 
invest nient  iii  the  business. 


CAPITAL  ACCOUNTS 

8.  Proprietor's  Capital  Account:  When  the  proprietor  or  owner  of  a  busi- 
ness invests  Cash,  debil  cash  because  it  is  received  into  the  business.  Credit 
the  (Proprietor's  name),  Capital,  because  he  paid  the  cash  into  the  business 

For  instance,   if   A.   I'».   Levering  began   business   ami   invested   cash.  $3,000, 

debit  Cash  $3,000,  and  credil  "A.  I'..  Levering,  Capital,"  $3, 

If  property,  such  as  merchandise,  is  also  turned  over  to  the  business  as  part 
of  the  investment.  Debit  merchandise  for  the  value  of  it.  For  instance,  if 
A.  Ii.  Levering  began  business  and  invested  Cash  $3,000,  and  Merchandise, 
$1,500,  debit  Cash  $3,000,  debil  Merchandise,  $1,500,  and  credit  A.  B.  Lever- 
ing, < lapital,  $4,500. 

•  Ian.   1.     A.  B.  Levering  began  the  Grocery  Business  and  invested  cash, 
$3,000,  and  Merchandise.  *l,r><l(). 


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II.I.rsTItATION  NO.   '.'      OPl   KING    ENTRY 


BOOKKEEPING  AND  ACCOUNTING  5 

Debit  Cash  $3,000,  and  debit  Merchandise  $1,500,  because  these  are  re- 
ceived. Credit  A.  B.  Levering,  Capital,  $4,500,  because  he  invested  this 
amount  in  the  business.  A.  B.  Levering,  Capital,  would  be  credited  for  any 
additional  investment,  and  debited  for  any  withdrawal  from  his  investment. 
The  Capital  account  is  debited  or  credited  only  for  what  affects  the  invest- 
ment. In  opening  a  set  of  books,  the  essential  facts  are  written  first,  and 
this  is  followed  by  the  journal  entry  to  record  the  investment,  as  shown 
above. 

Proprietor's  Personal  Account:  In  order  not  to  disturb  the  Capital  or 
Investment  account,  a  "Personal"  account  is  opened  for  the  proprietor,  as 
''A.  B.  Levering,  Personal,"  sometimes  called  a  drawing  account.  Debit  the 
"Personal"  account  for  any  goods  taken  from  store  and  for  any  money 
drawn  for  private  use.  Credit  the  "Personal"  account  for  any  money  returned 
of  that  drawn  for  private  use. 

Partnership:  In  the  case  of  a  partnership,  each  partner  is  given  a  "Cap- 
ital" account  to  show  his  investment  and  a  "Personal"  account  to  tak<  'arc 
of  all  small  amounts  not  intended  to  affect  the  investment  or  capital. 

9.  Posting:  Posting  is  transferring  the  debits  and  credits  to  the  Ledger 
accounts.  In  order  to  illustrate  the  "posting"  more  clearly,  the  same  trans- 
actions are  repeated,  and  the  journal  entries  are  arranged  in  the  order  they 
would  appear  in  the  Journal.  To  do  this,  the  last  transaction  above  showing 
the  opening  entry  for  the  books  and  the  Capital  account  is  placed  first.  The 
other  transactions  follow  in  the  order  they  have  been  presented  and  studied. 
Use  journal  paper  and  prepare  the  journal  entries  for  the  transactions  in  the 
order  given  below,  actually  writing  these  entries  on  the  journal  paper  and 
then  posting  them  to  the  Ledger  accounts.  Simply  looking  over  them  and 
tracing  the  items  is  not  sufficient. 


BUSINESS  TRANSACTIONS 

Jan.     1.  A.  B.   Levering  began   the   Grocery    business  on  January   1,   192---, 
and  invested  cash  $3,000,  and   Merchandise  $1,500. 

1.  Bought  25  bids.  II.  Apples  @  $5.25,  for  cash. 

5.  Sold  15  brls.  II.  Apples  @  $5.75,  for  cash. 

10.  Bought  of  Davis  Bros.  25  brls.  G.  Flour  (<i  $S.75.  on  account. 

15.  Sold  to  W.  II.  Mason.  15  brls.  G.  Flour  (5  $11.25,  on  account. 

20.  Bought  of  Davis  Bros.  50  cs.  M.   &  J.  Coffee  (a'  $5.17.     Paid   cash, 
$125.     Balance  on  account. 

V5.  Sold  to  TV.  II.  Mason  25  cs.  M.  &  J.  Coffee  (a  $5.70.    Received  cash, 
$75.     Balance  on  account. 


BOOKKEEPING  AND  ACCOUNTING 

27.  Received  $115  from  \Y.  II.  Mason  to  apply  <>n  account. 

28.  Paid  Davis  Bros.  $172.50,  on  account. 


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ILLUSTRATION    NO.    1".      A   JOURNAL 


10.  Posting:  To  post  the  Journal,  post  each  item  in  the  debit  column  to 
the  left-hand  or  debil  side  of  the  accounl  written  on  the  same  line  with  it. 
Post  each  item  in  the  credil  column  to  the  right-hand  or  credit  side  of  the  ac- 


BOOKKEEPING  AND  ACCOUNTING  7 

count  written  on  the  same  line  with   it.     Use  Ledger  ruled  paper  and   open 
these  accounts. 

Assume  that  the  Journal  is  page  1.  Write  "J  1"  in  the  "page  column" 
of  the  Ledger  account,  to  show  the  item  was  posted  from  page  1  of  the 
Journal.  Assume  that  each  Ledger  account  is  a  page,  and  the  figures  above 
at  the  right.  1,  2.  3.  4,  and  5,  are  the  pages  of  the  Ledger  accounts.  Notice 
how  the  pages  of  the  Ledger  accounts  are  entered  at  the  left  in  the  L.  F. 
(Ledger  Folio)  column  in  the  Journal.  The  following  are  the  Ledger  ac- 
counts, posted  from  the  Journal. 


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ILLUSTRATION    NO.    11.      LEDGER    ACCOUNTS 


11.  The  attention  of  the  student  has  been  called  to  the  fact  that  in  each 
journal  entry  the  amount  or  amounts  in  the  debit  column  must  equal  the 
amount  or  amounts  in  the  credit  column.  Tn  other  words,  each  journal  entry 
must  balance.    Therefore,  if  all  the  items  in  the  debit  column  of  the  Journal 


s 


BOOKKEEPING  AND  ACCOUNTING 


are  properly  posted  to  the  "debit  side"  ■  >!'  the  Ledger  accounts,  and  all  the 
items  in  the  credit  column  of  the  Journal  are  properly  posted  to  the 
"credit  side"  "I'  the  Ledger  accounts,  then  the  Ledger  must  !»•  in  balance, 

thai  is,  tlir  total  of  tlic  debit  side  of  all  Ledger  accounts  must  equal  tin'  total 
of  thr  credil  side  of  all  Ledger  a' ants.  The  following  will  prove  this  state- 
ment : 


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ILLUSTRATION    NO.    1  2.     TK1.W.   BALANCE 

This  is  called  a  Trial  Balance.  A  Trial  Balance  is  taken  from  the  Ledger 
accounts  al  the  end  of  each  month,  to  prove  the  Ledger.  If  an  item  were 
posted  to  the  wrong  side  of  an  account  or  a  wrong  amount  were  posted,  the 
Ledger  would  not  halanee  and  the  Trial  Balance  would  not  balance.  The 
figures  at  the  left  are  the  pages  of  the  Ledger  accounts. 

12.  It  is  better  to  take  the  Trial  Balance  by  differences,  in  fact,  the  Trial 
Balance  always  should  be  taken  by  differences,  thai  is,  place  the  difference 
between  the  two  sides  of  each  accounl  in  the  column  of  the  side  which  is 
larger.  Compare  the  Ledger  accounts  with  the  following  Trial  Balance  by 
differences  i 


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ILLUSTRATION   N<>    18      TRIAL  BALANCE  BIT   DIFFERENCES 

13.  Comments:  As  a  further  study,  the  student  is  asked  to  refer  to  the 
"Cash"  account.  The  total  cash  received  by  the  business  is  $3,276.25.  (The 
total  of  the  debit  side.)    The  total  cash  paid  oul  is  $428  75.     (The  total  of  the 

credil  side,  i    The  balai »f  cash  on  hand  is  $2,847.50.    I  $3,276.25  less  $  128  75 

The  difference  between  the  cash  received  and  the  cash  paid  oul  must  be  the 
balance  of  cash  on  hand. 

Refer  to   I 'axis  Bros,   account.     Mr.  Levering   owed   Davis   Bros.  $352.25. 
Thr  total  of  the  credil  side.      He  paid  them  $172.50.     'The  total  of  the  debit 
side.)      .Mr.   Levering  owes  Davis  Bros.  $179.75        $352.25  less  $172.50.) 


BOOKKEEPING  AND  ACCOUNTING 


Refer  to  W.  II.  Mason's  account.    W.  II.  Mason  owed  Mr.  Levering  $236.25. 
(The  total  of  the  debit  side.)     lie  has  paid  $115.     (The  total  of  the  credit 


side.)     Mr.  Mason  owes  Mr.  Levering  $121.2 


($236.25  less  $115.) 


W.  II.  Mason  is  a  customer  (one  to  whom  we  sell  goods), 
a  creditor  (from  whom  we  buy  goods  to  be  sold  for  profit). 


and  Davis  Bros. 


NOTES,  DRAFTS  AND  ACCEPTANCES 

14.  A  note  is  a  written,  unconditional  promise  to  pay  the  amount  stated 
in  figures  and  in  writing,  at  a  specified  time,  and  signed  by  the  person  or  firm 
who  agrees  to  pay  it. 


ILLUSTRATION  NO.  14.   MOTE  WITH  INTEREST  FROM  DATE 

The  "Maker"  of  a  note  is  the  party  who  signs  it.  The  "Payee"  is  the 
party  in  whose  favor  the  note  is  made.  The  ''Maturity"  is  the  date  when 
due.  The  "Maturity  Value"  is  the  amount  of  the  note  and  interest  at  the 
due  date.  The  "Face  Value"  is  the  amount  staled  in  the  face  of  the  note, 
ill  figures  ami  in  writing. 

15.  A  Sight  Draft  is  a  written  order  by  a  person  or  firm  directing  another 
person  or  firm  to  pay  the  amount  stated  to  a  third  party.  The  one  who  signs 
the  draft  is  the  drawer;  the  one  who  is  asked  to  pay  is  the  drawee;  the  one 
to  whom  the  amount  is  paid  is  the  payee. 


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ILLUSTRATION    NO.    15.       A    STGHT   DKU'T 


10 


IJOOKKKKIMN'li   AND  At  <  <  M  XT1XG 


16.  Acceptance:     A   time  draft   "accepted"   is  called  an   accepts A 

time  drafi  is  accepted  by  writing  across  the  face  of  the  draft,  usually  in  red 
ink,  the  word  "Accepted,"  and  the  date  and  signature  of  the  acceptor.  It 
then  becomes  a  "promise  to  pay"  and  is  treated  the  same  as  a  note  in  the 
keeping,  thai  is,  it  is  called  "Notes  Receivable"  or  "Notes  Payable," 
as  the  case  maj  be. 


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IT.USTRATIOX   NO.    10       A   TIMK    DRAFT     ACCEPTED.      AX    ACCEPTANCE 

17.  A  Trade  Acceptance  is  a  time  drafi  accepted,  and  is  treated  in  the 
books  the  same  as  a  note.  It  is  virtually  the  same  form  as  the  ordinary  accept- 
ance, luit  its  purpose  is  different.  The  ordinary  time  draft  is  usually  used 
to  make  collections,  and  the  very  fad  that  a  time  draft  has  been  drawn  and 
accepted  is  evidence  of  an  extension  of  time  on  the  lunik  accounl  for  some 
reason,  with  whatever  that  may  mean,  while  the  purpose  of  the  Trade  Accepl 


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TRADE..  ACCEPTANCE 


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ILLUSTRATION    NO.    17.     A   TRADE    ACCEPTANCE 


ance  is  to  provide  an  evidence  of  debl  thai  ean  be  used  by  the  holder  in  a 

better  way  than  he  can  the  open  l i.  account.  In  other  words,  it  is  a  plan 

for  putting  the  book  aci uts  in  the  form  of  commercial  paper,  so  they  can 

be  used  through  the  hank,  thus  keeping  the  money  in  action  instead  of  lying 

idle  in  open  a< unts. 

18.  Notes  and   Acceptances  of  others,  signed  or  accepted  by  others,  are 
called  "Notes  Receivable"  in  our  books,  both  when  received  and  when  given 

ou1      Our  own  notes  and  i iptances,  signed  or  accepted  by  us,  are  called 

"Notes  Payable"  in  our  books,  both  when  given  oul  and  when  received. 


BOOKKEEPING  AND  ACCOUNTING 


11 


19.  Assets:  Wha1  a  person  owns,  and  whal  is  owing  to  him  (in  miles 
ami  accounts)  are  his  assets  (or  resources). 

Liabilities:  What  a  person  owes  (in  notes  and  accounts),  Ins  obligations, 
are  his  liabilities. 

Net  Capital  or  Net  Investment:  The  difference  between  a  person's  total 
assets  and  his  total  liabilities  is  his  Net  Capital  or  Net  Investment.  The 
same  is  true  of  a  firm  or  corporation. 

20.  Accounts  Receivable:  Persons  and  firms  to  whom  we  sell  goods  are 
"customers."  As  a  rule,  there  are  a  large  number  of  these  accounts  with 
customers.  They  would  make  a  long  list  in  a  Trial  Balance.  To  avoid  writ- 
ing this  long  list,  these  accounts  are  all  grouped  in  one  total  amount  and 
called  " Accounts  Receivable."'  making  only  one  item  in  the  Trial  Balance. 

21.  Accounts  Payable:  Persons  and  firms  from  whom  we  buy  goods  are 
"creditors."  There  may  be  quite  a  number  of  these  accounts,  yet  not  so 
many  as  of  customers.  These  accounts  are  grouped  in  one  total  amount  and 
called  "Accounts  Payable."  making  only  one  item  in  the  Trial  Balance.  The 
following  Statement  will  illustrate  what  has  been  said  above. 

Problem  1.  At  the  (lose  of  business  December  31,  192. .,  G.  M.  Reynolds' 
hooks  showed  the  following: 

Assets:  Cash  on  hand,  $4,532.50;  Merchandise  on  hand,  $5,975.40;  Office 
Equipment,  $1,150;  House  and  Lot,  $4,500.  He  holds  A.  R.  Perkins'  note  for 
$075;  J.  M.  Sim's  note  for  $535;  and  G.  M.  Summers'  note  for  $850.  The 
following  owe  him  on  account:  C.  T.  Smith  $425.80,  E.  R.  Newell  $387.50, 
T.  J.  Ryan  $412.90.  W.  L.   Martin  $028.30,  Munson  Bros.  $723.15. 

Liabilities:  He  owes  a  note  of  $625  to  S.  G.  Squires  and  a  note  of  $2,000 
to  the  bank.  He  owes  the  following  on  account :  Ely  &  Walker  $1,895.70 ; 
\Y.  II.  Moran  &  Son  $1,204.50;  Carlton  Dry  Goods  Co.  $1,575.25;  W.  II.  Moran 
&  Son  $1,110.60.    What  is  C.  M.  Reynolds'  net  capital.'     Solution: 


Statement   of  G.   II.   Reynolds,    December  31,    192 


Assets  : 

Cash 

Merchandise 
Office  Equipment 
House  and  Lot 
Notes  Receivable 
Accounts  Reoelva 
Total  Assets 


4538 

50 

5975 

4C 

1150 

00 

4500 

oc 

2060 

oc 

le  2577 

65 

20795 

55 

Liabilities: 

Botes  Payable 
Accts.  Payable 
Total  Liabilitii 

Capital  or  net  In- 
vestment 


2625 

5846 


8471 


12324 


20795 


05 


5fi 


55 


The  difference  between  the  total  assets,  $20,795.55.  and  the  total  liabilities, 
$8,471.05,  is  G.  M.  Reynolds'  net  capital  or  net   investment.  $12,324.50.     Notes 

Receivable,  $2,060,  is  the  total  of  all  the  notes  Mr.  Reynolds  holds.     A imts 

Receivable,  $2,577.65,  is  the  total  of  what  all  customers  owe  him.  Notes  Pay- 
able. $2,625.  is  the  total  of  all  the  notes  Mr.  Reynolds  owes  to  others.  Accounts 
Payable,  $5,846.05,  is  the  total  of  what  Mr.  Reynolds  owes  to  creditors. 


12  BOOKKEEPING  AND  ACCOUNTING 

Problem  2:  Prepare  a  similar  statement  from  the  Eollowing  data  of  Miller 
Bros,  whose  books  show  the  following: 

Assets:  Cash  on  hand,  $5,384;  Merchandise  Inventory,  $6,234.50;  Office 
Equipment,  $780.  They  hold  aotes  as  follows:  a  60  day  note  for  $1,250 
against  A.  E.  Pearson,  and  a  90  day  noti  for  $875.30  againsl  L.  M.  Preston. 
The  following  owe  them  on  account:    J.  L.  !'  -  175.60;  J.  M.  Noel,  $  IIs  20  . 

II.  M.  Smith.  $625.30. 

They  owe  a  90  day  note  I'm-  $1,000  to  I;.  M.  Sawyer  &  I  o.,  and  a  30  daj 
note  for  $1,500  to  tin'  bank.  They  owe  tin'  following  on  account:  I.  K. 
Palmer,  $513.40,  W.  II.  MarshaU,  $319.15,  and  R.  -I.  Brown,  $250.  What  is 
thru-  net  capital  or  net   investment  .' 

22.  Merchandise  Accounts:  All  merchandise  boughl  and  sold,  and  returns 
ill'  merchandise  and  all  allowances,  could  be  kepi  in  one  "Merchandise" 
account,  but  it  would  contain  mixed  information,  ami  would  1m'  verj  unsat- 
isfactory. 

Instead  "I'  keeping  our  mixed  "Merchandise"  account,  all  purchases  "t 
merchandise  are  called  "purchases"  and  are  kept  in  a  "Purchases"  account. 
All  sales  of  merchandise  are  railed  "Sales"  and  are  kept  in  a  "Sales"  account. 
Any  returned  goods  from  purchases  ami  any  allowances  on  purchases  may 
he  credited  in  "Purchases"  account,  or  a  separate  "Purchases  Returns  ami 

Allowances"  account   may  he  kept.     Any  retur 1  goods  from  sales  and  any 

allowances  on  sales  may  he  charged  (debited)  to  "Sales"  account,  oi  a  sep- 
arate "Sales  Returns  and  Allowances"  accounl  may  he  kept. 

A  "Purchases  Discount"  account  is  kepi  to  distinguish  the  discount 
received  for  the  prompt  payment  of  goods  bought  from  the  discount  on  notes. 
A  "Sales  Discount  "  accounl  is  for  the  discounl  allowed  customers  for  prompl 
payment. 

23.  Expense  Accounts:  Expenses  of  all  kinds  could  he  kept  in  one 
expense  account,   hut    it    is  better  to  have  the  hooks  show   tlie  expense  or  cost 

of  each  department  of  the  business.  The  usual  expense  accounts  are  Admin- 
istrative Expense,  Selling  Expense,  ami  Delivery  Expense,  other  expense 
accounts  may  be  kept,  such  as:  Office  Equipment  Expense,  Store  Fixtures 
Expense,   Heal    Estate   Expense  ami    Income.    Warehouse   Expense,   Officers' 

Salaries.   Salesmen's  Salaries,  etc.      The  expense  accounts  that    should   be  kept 

depend  upon  the  nature  of  the  business.  Ke.p  those  only  that  are  necessary 
or  required.    Debit  any  expense  to  the  expense  accounl  that  is  affected. 

24.  Fiscal  Period:  The  fiscal  period  in  a  business  is  the  financial  period 
of  time  during  which  the  business  is  conducted  before  closing  the  books  to 

ascertain  the  protit  or  loss,  and  the  condition  of  the  business.  A  fiscal  period 
may  be  for  one  month,  three  months,  six  months,  or  for  one  year,  usually 
three  months,  six  months  or  a  year.  The  hooks  cannot  he  closed  for  the  pur- 
pose mentioned  without  taking  an  inventory  or  inventories,  at  which  lime 
the  accruals  and  depreciations  are  adjusted  as  shown  at  the  end  of  the  fob 
lowing  set. 


CHAPTER  II 
BUSINESS  OF  W.  J.  GOODNOW 


Illustrating  Final  Trial  Balance  Before   Closing,  Accruals, 
Deferred  Items,  Profit  and  Loss  Statement  and  Balance  Sheet. 

25.  The  books  to  be  used  are  Journal  and  Ledger.  It  is  suggested  that 
journal  and  ledger  paper  be  used  instead  of  regular  blank  books,  as  the 
student  will  then  be  better  prepared  to  do  neat  and  accurate  work  in  the 
main  books.  This  set  is  designed  to  serve  as  a  reference  as  to  procedure, 
following  the  posting  and  preparing  of  the  Trial  Balance,  of  providing  for 
the  inventories,  preparing  for  the  Final  Trial  Balance,  Balance  Sheet  and 
Profit  and  Loss  Statement. 

About  one-half  of  the  journal  entries  for  the  transactions  in  this  set  are 
shown  in  the  illustration  of  the  Journal  which  follows.  The  remainder  of 
the  journal  entries  are  left  for  the  student  to  prepare,  but  the  similar  entries 
illustrated  and  the  suggestions  given  under  the  transactions  will  make  this 
easy  to  do.  The  posting  to  Ledger  accounts  is  shown  in  the  illustrations  of 
the  Ledger  accounts,  but  none  of  the  adjustment  journal  entries  nor  the 
closing  journal  entries  are  posted.  These  are  shown  and  explained  so  that 
it  will  be  a  simple  matter  for  the  student  to  get  the  proper,  record  in  the  books. 
Enough  of  the  bookkeeping  is  illustrated  to  guide  the  student  so  well  that 
no  outside  help  will  be  needed. 

26.  The  Principles  learned   in   the   work   preceding  are  restated  as  rules 
for  a  guide  and  reference  in  preparing  journal  entries. 


1. 
9 


Debit  what  is  received  or  bought. 
Credit  what  is  sold  or  given  out. 
Debit  persons  or  firms  when  they 
owe    us,    and    Credit    them    when 
they  pay. 


Credit  persons  or  firms  when  we 
owe  them,  and  Debit  them  when 
we  pay  them. 

Debit  what  costs  value,  and  Credit 
what  produces  value. 


Every  debit  must  have  a  corresponding  credit. 
Every  credit  must  have  a  corresponding  debit. 

When  an  account  (or  accounts)  is  debited,  some  other  account  (or 
accounts)  must  be  credited  for  the  same  or  an  equal  amount.  Decide  the 
account  (or  accounts)  to  be  debited,  and  credit  the  other  account  (or  accounts) 
in  the  transaction. 

Every  transaction  affects  two  accounts  and  may  affect  more  than  two 
accounts.  If  a  transaction  affects  two  accounts,  it  affects  one  account  on 
one  side  and  the  other  on  the  opposite  side.  The  above  rules  are  not  intended 
to  be  memorized.  They  are  simple  statements  of  principles  that  have  been 
used  in  the  preceding  work,  and  will  be  a  guide  in  deciding  on  which  side 
an  account  is  affected,  in  preparing  journal  entries  for  the  following  trans- 
actions. 

13 


14  BOOKKEEPING  AND  ACCOUNTING 

BUSINESS  TRANSACTIONS 

l.i.  Dec.  1.  W.  J.  Gooilimw  began  business  on  December  1.  L92..,  with  an 
investmenl  represented  bj  the  following  assets  resources)  and  lia- 
bilities: 

Cash,  $5,825.75,    Merchandise   inventory,  $8,972.50,    Real    Estate,   Bouse  and 

Lot,   168   Part    Ave.,  $4,750. 
He  owes  \Y.  II.  Martin  &  <  !o.,  <  Ihicago,  III  .  $2,097  50,  and  Warner  Bros.,  Detroit, 

.Mich..  $2,450.75  on  account. 

Kncli   asset    is  a   ■! il>i t.  and   each   liability   is   a   credit.     The  difference  between 
assets  and   liabilities   is   W.  J.   Goodnow's   Capital   or   net    investment.     (Paragraph   19.) 
illust  ration   No.    18   follow  ing. 

2a.  Dec  1.     Boughl   for  cash  of  Acme  Office  Supplj    Co.  3   Desks  (§   $42.25, 

1(1  ('lairs  (,/  $7.90,  2  Typewriters  (.,   *inii.  •_>  ofiiee  liu-s  (a   $35,  1  Piling 

Case  $75. 

Debit  Office  Equipment  $550.75,  but  itemize  in  the  Ledger  account  when  posting 
in  order  to  show  the  original  cost  of  each  article  in  case  of  less  by  lire  or  otherwise. 
Credit  Cash  for  the  amount  paid. 

3a.  Doe.  1.  Boughl  Eor  cash  of  Ames  Truck  Co.  1  Two-ton  Truck  for  $500, 
and  1  One-ton  Truck  Eor  $350. 

Debit  Delivery  Equipment  and  itemize  when  posting.  Credit  Cash  for  the  amount 
paid. 

4a.  Dee.  2.  I'aid  (;.  II.  I'.rown  Stationery  Cb.  Eor  blank  books,  $85.70,  and 
office  supplies.  $18.60. 

Debit  Administrative  Expense  and  ere, lit  Cash.  Postage,  office  supplies,  office  help. 
rent  and  any  expense  for  the  general  conduct  of  the  business  is  charged  to  Admin- 
istrative Expense,  unless  separate  accounts  are  kept    for  some  general   expei  wta. 

5a.  Dee.  2.  Paid  Auto  Repair  Co.,  Eor  repairs  on  Trucks,  $85.45,  and  for  oil 
and  gasoline,  $27.95. 

Debit  Delivery  Expense  and  ere, lit  Cash.  All  expenses  of  trucks  and  drivers  are 
charged   to   Delivery    Expense. 

Ga.  Dee.  i'.  Purchased  of  Glass  >.V  Bryant,  Kansas  City,  Mo.,  Merchandise  as 
per  Invoice  No.  1.  3  10,  a  60,  $1,804.12.  Purchased  of  W.  II.  Martin 
&  Co.,  Chicago,  111..  Merchandise  as  per  Invoice  No.  2,  3  10,  n  60, 
$1,617.53.  (Mnter  in  two  separate  journal  entries.  Debil  "Purchases" 
in  each  ease,  because  merchandise  is  bought.  Credil  Glass  &  Bryant, 
$1,804.12,  and  credit  W.  II.  Martin  «S;  Co.,  $1,617.53,  because  we  owe 
them. 

Note:     •"•/10>  n/60  are  the   terms  of  sale  on   the  ir  discount 

will  be  allowed    if  the   invoice   is  paid   within    10  days   from   the   date   oi'  invoice,     n 
means  the  in\oi,e  is  net  and  due  i"  60  days.     No  discount  is  allowed  it'  payment  is  made 

time  aftei    10  days.     l<   is  not   necessai  archase  in  the  books,  as  the 

itemize,!  an, I  is  filed  for  reference.    Oi  ;   L0,  n  60  means  the  goods  are 

purchased  on  account. 

7a.  Dee.  3.     Sold  to  C.  P,  Dalton  &  Son.  509  Ash  St..  City,  2  10,  n  30,  2500 
His.  t;  Sugar  (a    li"  -e.  125  cs.   Extra   Pepper  (§   $4.75.     Sold  to  W.  II. 
Marsh  &  Co.,  Toledo.  Ohio,  2  1".  rj  30,  125  bx.  Evaporated  Apples 
$4.75,  7.".  brls.  Family  Flour  ut   $7.75. 

Enter  in  two  journal  entries.     Debit   C.  P.  Dalton  -^   Son   for  the  amount  ofi 

their  bill  and  credit  "Sales"  for  the  same  -. ant,  and  a  similar  entry  for  \V.  11.  Man>h 

t«.  &  Co 


BOOKKEEPING  AND  ACCOUNTING  15 

Sa.  Dec.  3.     Received  cash  for  sundry  cash  sales,  $427.50. 

Debit  Casli  $427.50,  because  cash  is  received;  credit  "Sales"  $427.50,  because  mer- 
chandise is  sold.  Any  purchase  of  merchandise  is  called  "Purchases,"  and  any  sale 
of  merchandise   is  called   "Sales." 

9a.  Dec.  3.  W.  J.  Goodnow  took  from  the  stare  for  private  use,  10  cs.  Ideal 
Tomatoes  @  $3.25,  and  11  cs.  Red  Raspberries  @  $3.40. 

Debit  W.  J.  Goodnow,  Personal,  because  he  owes  the  business.  Credit  "Sales," 
because  merchandise  is  sold.  The  purpose  of  the  proprietor's  personal  account  is  to 
keep  such  transactions  as  this  out  of  liis  Capital  or  investment  account,  as  they  arc  not 
intended   to  affect   the   investment. 

10a.  Dec.  3.  Paid  Regan  Printing  Co.  $185.30  for  printing  sales  form  letters 
and  advertising-  booklets. 

Debit  "Selling  Expense"  and  credit  Cash.  Any  expense  for  the  cost  of  selling 
goods  is  debited  to  "Selling  Expense"  unless  separate  accounts  are  kept  for  advertising, 
sa  li'smen  's   salaries,   etc. 

11a.  Dec.  3.  Received  a  credit  memorandum  for  $124.75  from  Class  & 
Bryant,  allowance   for  damaged  goods  on  invoice  of  December  2. 

Debit  Glass  &  Bryant  and  credit  "Purchases."  Credit  "Purchases"  account  for  all 
goods  returned  by  us  from  purchases,  and  for  any  allowance  we  receive  for  shortage  or 
damaged  goods,  and  at  the  same  time,  debit  the  person  or  firm  who  makes  the  allow- 
ance to  us. 

12a.  Dec.  4.  Allowed  C.  P.  Dalton  &  Son  $92.50  for  damaged  goods  on  bill 
of  December  3. 

Debit  "Sales"  $92.50,  and  credit  C.  P.  Dalton  &  Son.  Debit  "Sales"  account  for 
any  goods  returned  from  Sales,  and  for  any  allowance  for  shortage  or  damaged  goods, 
and,  at  the  same  time,  credit  the  person  or  firm  to  whom  we  make  the  allowance. 

If  a  separate  "Sales  Returns  and  Allowance"  account  is  kept  the  above  allowance 
would  be  debited  to  this  account.  It  depends  upon  the  nature  anil  volume  of  the  busi- 
ness  as   to   whether   this   separate   account    should   be   kept. 

13a.  Dec.  4.  Accepted  Class  &  Bryant's  10  day  trade  acceptance  for  $1,628.99, 
dated  December  2,  and  received  3'i  discount  on  balance  of  Invoice  No. 
1,  $1,679.*37. 

Debit  Glass  &  Bryant  $l,o79.37.  Credit  Notes  Payable  $1,(528.99  (face  value),  and 
credit  "Purchases  Discount,"  $50.38.  When  the  decimal  is  less  than  half  a  cent,  drop 
the  decimal;   but    when  a  half-cent    or  more,  add   one  cent. 

Usually  a  trade  acceptance  is  not  given  for  so  short  a  period  as  10  days,  but  is  used 
where  the  discount  period  is  30  or  (ill  days  or  more.  It  is  used  here  for  this  short  period 
to  show  how  it  is  entered  in  the  books.  When  an  acceptance  given  on  account  falls  due 
within  the  discount  period,  the  giver  is  entitled  to  the  discount  the  same  as  if  a  cash 
payment  were  made.  The  purpose  of  the  trade  acceptance  is  to  keep  the  money  in 
action,   as   the    holder    can   discount    it    at    the   bank    and    use    the    money    in    the    business. 

14a.  Dee.  .">.  Received  a  10  day  trade  acceptance  for  $1,151.50,  dated  Decem- 
ber 3.  from  W.  II.  Marsh  &  Co.  on  account,  and  allowed  2%  discount  on 
bill  of  December  3.  i  Debit  Notes  Receivable  $1,151.50.  Debit  "Sales 
Discount"  $23.50.  Credit  W.  II.  Marsh  &  <'".  $1,175.  The  explanation 
under  13a  applies  here.) 

15a.  Dec.  5.     Paid  J.  M.  Brown  $350  for  rent  of  store  building  for  our  month 

from   December    1.    to    D ruber   31.      (Debit    Administrative   Expense 

See  4a.) 

16a.  Dec.  5.  Sold  to  W.  II.  Draper  &  Co..  Utica,  X.  V  .  2  15,  n  30,  85  brls.  G. 
Flour  @  $8.50,  125  doz.  bx.  Ideal  Tomatoes  (a    $3.50.      (See  7a.) 


l(j  lUtoKKKKIMNC   AND  ACCOUNTING 

17a.  Dec.  (i.  Paid  bookkeeper  and  office  help  for  the  week,  $172.50.  Paid 
salesmen  and  clerks  in  the  sales  department   for  the  week,  $275.80. 

Debit    Administrative    Expense    $172.50,    because    office    help    is    a    general    expi 
Debii   Selling   Expense  $275.80,  because  any   cost    of   Bales   is  a   selling  expen 
Eor   the   amount    paid    out. 

18a.  Dec.  6.  Paid  W.  II.  Markham  Insurance  Agency  $270,  premium  on  Insur- 
ance policy  on  stock  of  goods,  to  cover  from  December  1.  I  1  >i-l > i t  "Insur- 
ance" $270,  because  it  cosl  value  (Rule  5  .  Credit  Cash  For  the  amount 
paid. 

19a.  Dec.  8.  Pos1  the  books  to  date.  Open  the  accounts  on  your  Ledger  paper 
in  tlu>  following  order:  W.  J.  Goodnow,  Capital.  W.  .I.  Goodnow,  Per- 
sonal, ('ash.  Notes  Receivable,  Notes  Payable,  Office  Equipment,  Delivery 
Equip)  lent.  Weal  Estate,  house  and  lot,  insurance,  Merchandise  tnventorj 
Purchases,  Purchases  Discount,  Freight  In.  Sales,  Sales  Discount,  Admin- 
istrative Expense,  Selling  Expense,  Delivery  Expense,  Real  Estate 
Expense  and  Income,  Lnteresl  and  Miscount.  C.  P.  Dalton  &  Son,  509  Ash 
St..  City,  W.  II.  Marsh  &  Co.,  Toledo.  Ohio,  W.  II.  Draper  &  Co.,  Utica,  N. 
Y..  Warner  Bros.,  Detroit,  .Mich..  Class  iV  Bryant.  Kansas  City,  Mo..  \Y. 
II.  Martin  &  Co..  Chicago,  HI. 

Give  I 'ash  28  lines.  Purchases  12  lines.  Sales  20  lines.  Administrative 
Expense  1  I  lines,  and  each  of  the  other  accounts  10  lines.  Page  the  Jour- 
nal and  Ledger  beginning  with  1,  placing  the  number  at  the  right-hand 

upper  corner. 

In  posting,  enter  the  page  of  the  Journal  in  the  folio  page  column  of 
the  Ledger  account  and  the  page  of  the  Ledger  accounl  in  the  L.  !•'.  col 
umn  in  the  Journal,  Eor  quich  reference.  In  posting  to  the  debit  side  of 
customers'  accounts  (those  to  whom  we  sell  .  enter  the  terms  2  15,  n  30, 
or  whatever  the  terms  are.  in  the  explanation  column.  Do  the  sane  w  hen 
posting  to  the  credit  of  creditors'  accounts  those  from  whom  we  buy). 
This  is  for  convenience  in  watching  the  discounts  and  the  date  when  due. 
Be  careful  to  gel  the  address  id'  persons  and  firms  in  the  Ledger  accounts. 

What  is  the  cash  balance .' 
20a.  Dee.  8.     Received  a  check  for  $675  from  ('.  I'.  Dalton  &  Sou  mi  account, 

and  allowed  1"  ,    discount. 

Debit  Cash  $675.  Debit  "Sales  Discount"  $13.78.  ■•■•.  of  the  total  credit.)  Credit 
c.  I'.  Dalton  &  Sen  $688.78  ($675  divided  by  989!  .  because  they  have  paid  iliis  amount, 
including  the  discount. 


21a.  Dee    8.     Received  cash  for  sundry  retail  sales.  $598.75.     'See  8a. 

22a.  Dec.  9.     Paid  B.  ,v.  o.  R,  R.  Co.  $218.25  for  freight  on  goods  purchased. 

Pel'  i   in''  ac "t.  and  credit  cash.    This  freight  adds  t<>  thi  '  mer- 

chandise  and  could  !"■  debited  to  "Purcl  ccount,  but  it  is  better  to  have  n  separate 

Freight  account  for  convenience  in  the  adjustment  of  freight  claims.  "Freight  Out.'' 
that  is.  freight  prepaid  en  goods  sold,  should  be  kept  in  :i  separate  account,  because  if 
ore  sell  at  a  delivered  price  and     i  have  to  stand  this  fn  illy  a  selling  expense. 


BOOKKEEPING  AND  ACCOUNTING  17 

« 

23a.  Dec.  10.     Borrowed  .+5,000  at  the  Central  National   Bank  ur  15  day 

note  at  6%.     In  other  words.  "Discounted"  our  own  $5,000  note  at  the 
bank  at  6(/i   for  15  days. 

Debit  Cash  $4,987.50j  the  proceeds  of  the  note,  which  is  the  cash  actually  received. 
Debit  Interest  and  Discount  $12.50  (Rule  5).  Credit  Notes  1'ayal.le  $5,000,  because  our 
note  is  given   out. 

The  Bank  collects  interest  in  advance  on  a  loan,  that  is,  the  bank  discounts  youi  note 
and  gives  you  the  proceeds.  This  is  bank  discount,  the  simple  interest  on  the  face  of  the 
note,  hence  the  account  ''Interest  and  Discount."  If  there  are  many  notes  and  accept- 
ances with  creditors  and  also  loans  at  the  bank,  it  is  better  to  separate  them  and  use  the 
accounts  "Notes  Payable — Trade"  and  "Notes  Payabli  —  Hank.''  Separate  interest 
accounts  may   also  be   kept. 

24a.  Dee.  10.  Received  a  60  day  note  for  +1,000  at  ti',  from  W.  II.  Draper 
ec  Co.  on  account.  Gave  \Y.  II.  Martin  &  Co.  our  60  day  note  lor  $2,097.50 
at  G'  < .  on  account.  Gave  Warner  Bros,  our  60  day  note  for  $1,500  at  ti' . 
on  account.  (Enter  separately.  See  journal  entries  in  Illustration 
No.   18.) 

25a.  Dee.  10.  Returned  goods  to  the  value  of  $169.10  to  AY.  II.  Martin  &  Co. 
for  credit.     (See  11a.  i 

26a.  Dec.  11.  Purchased  of  Glass  iv.  Bryant  merchandise  as  per  Invoice  No. 
3,  3/15,  n,  90,  $2,785.20.  Purchased  of  \Y.  II.  Martin  &  Co..  merchandise 
as  per  Invoice  Xo.  4.  :!   15.  n/90,  $2,135.80.     (Enter  separately.  Sec  6a.) 

27a.  Dec.  12.  Sold  to  < '.  P.  Dalton  &  Son.  2  15.  n/30,  125  brls.  Early  Potatoes 
@  $6.25.  85  brls.  P.  B.  Flour  @  +8.25.  Sold  to  AY.  II.  .Marsh  &  Co.,  2/15, 
n/30,  95  cs.  No.  1  Raisins  @  +5.25,  125  doz.  bx.  O'Meal  Crackers  @ 
+4.75.      (7a.) 

28a.  Dec.  12.     Paid  AY.  H.  Martin  &  Co.  $1,404.98,  on  account,  and  received 

'■'>' ,  discount  on  balance  of  invoice  of  Dee.  2,  +1,448.43. 

Debit   W.   H.   Martin    &   Co.   $1,448.43,   in   full    for   balance   of   invoice    ($1,617.53    less 

$169.10   allowance).      Credit    Cash,  $1,-104. US   and   ere. lit   Purchases   Discount   $43.45    (3%   of 
balance). 

29a.  Dec.  12.  Received  +122.47  from  C.  P.  Dalton  &  Son.  which  pays  balance 
of  bill  of  Dec.  3.  $124.97,  allowing  2« ,   discount. 

Debit  cash  $122.47.  Debit  "Sales  Discount"  $2.50,  because  the  discount  cost  us  this 
amount  which  we  allow  for  payment  within  10  days.  Credit  C.  P.  Dalton  &  Son  $124.97, 
the  balance  on   this  bill.     The  check   and   allowance   for   discount    pays   it. 

30a.  Dec.  13.  Paid  office  help  for  the  week  +172.50.  Paid  sales  force  f<>r 
the  week.  +275.80.  Paid  delivery  drivers  for  two  weeks,  $110.  (See 
17a.     Debit    Delivery   Expense  for  the   waves  of  the  drivers. 

31a.  Dec.  15.     Received  +1.151.50  from   AY.   II.    Marsh   &   Co.   to   pay   their  10. 
day  acceptance,  due  today.     Gave  Glass  &  Bryant  a  check  for  $1,628.99 
to  pay   our  acceptance  of  December  4.      (Enter   separately.     See    Illus- 
tration No.  18.     Why  is  Notes  Receivable  credited  and   Notes   Payable 
debited  ?) 

32a.  Dec.  15.  Received  an  allowance  of  +184.75  for  damaged  goods  on  Invoice 
of  Dee.  11,  from  Class  &  Bryant.     (See  11a.) 

33a.  Dec.  16.  Received  check  for  $2,000  from  AY.  J.  Goodnow  as  an  addi- 
tional investment.     (See  paragraph  8.) 


18  BOOKKEEPING  AND  ACCOUNTING 

34a.  Dec.  17.  W.  II.  Marsh  &  Co.  returned  L5  cs.  No.  1  Raisins  (§  $5.25  and 
in  d(i/.  hx.  O'Meal  Crackers  <«  $4.75,  for  credit.  Allowed  C.  1".  Dalton 
&  Son  $112.50  for  damaged  goods  on  bill  of  Dec.  12.     (Sec  l Uii . 

3.3a.  Dee.  18.  Received  $12.75  from  Regan  Printing  Co.  as  a  refund  for  over- 
charge on  bill  for  printing  advertising  matter,  of  December  3.  Keen..! 
$8.75  from  G.  II.  Brown  Stationery  Co  as  a  refund  on  bill  of  December 
2,  for  office  stationery. 

Selling   Expense  was  charged   for  the  bill  of  December  3,  and  thi  (12.75 

is  credited  to  this  account,  because  it   reduces  thai  charge.     For  the  same  reason,  Admin- 
istrative  Expense  is  credited   for  the  $8.75. 

.'s6a.  Do-.  18,     Paid  C.  &  A.  R.  R.  Co.  $314.75  for  frcitrhl  on  a Is  purchased. 

(See  22a. 

37a.  Dec  18.  Received  $11.35  refund  from  B.  &  0.  R.  R.  Co.  for  overcharge 
■  m  freight  bill  of  December  L0.  Credit  Freight-In  account,  because  the 
freight   was  charged  to  this  account.) 

38a.  Dec.  18.  Paid  G.  II.  Owen  $38.75  for  decorating  house  at  168  Park 
Ave.     (Debit   Real  Estate  Expense  and   Income  account. 

39a.  Dec.  19.  Received  $125  from  -I.  M.  Leverich  for  rent  of  house  at  168 
Park  Ave.  for  one  month  from  December  15  to  January  15.  (Debit  cash 
and  credit  Real  Estate  Expense  and  Income,  because  the  real  estate  pro- 
duced this  amount.     Rule  5.) 

40a.  Dec.  20.     Paid   office  help   for  the  week,  $172.50.     Paid  sales  force  for 

the    week,   $275.80. 

41a.  Dec.  20.  Purchased  of  Warner  Bros,  merchandise  as  per  [nvoice  No. 
5,  3  L5,  n  90,  $3,485.75  Purchased  of  Glass  &  Bryant  merchandise  as 
per  Invoice  Xo.  ti.  ::  15,  n  90,  $2,389.65.      6a. 

42a.  Dec,  20.  Post  the  hooks  to  date.  In  posting  to  customer's  and  creditor's 
accounts,  ami  also  to  Notes  Receivable  and  Notes  Payable,  if  the  last 
item  posted  balances  an  item  or  items  on  the  opposite  side,  rule  a  red 
ink  line  under  the  items  that  balance  on  each  side.  The  purpose  is  to 
rule  these  items  out   and  save  addition  later.     What   ;s  the  cash  balance! 

43a.  Dec.  22.     W.  -T.  Goodnow  drew  $135  for  his  private  use.       Debit  W,  J. 

1  lOOdnOW,   Personal.      Sec  9a, 

44a.  Dec.  23.  Sold  to  W.  II.  Draper  &  Co.  2  15,  n  30,  125  cs.  1:Mh.  Choco 
late  (5  $7.25,  95  bx.  I).  Peaches  u,  $6.25.     Sold  to  W.  11.  Marsh  &  l  o 

2  L5.  n  30,  15  cs.  Putter  Prints.  228]  lbs.  (5  50c,  75  brls,  Evap.  Apples 
(5  $4.85.  Sold  to  C.  P.  Dalton  &  Son.  2  15,  n  30,  85  brls.  G.  Flour  @ 
$8.75,  L25  bx.  Silver  Prunes  ui   $5.15.     (Enter  separately. 

loa.  Dec.  24.  Received  $160  from  W.  II.  Draper  &  Co.  on  account.  No  dis- 
count. Received  $946.92  from  \V.  II.  .Marsh  &  Co.  on  account  and  allowed 
l",  discount  on  balance  of  bill  of  Dec  12,  $966.25,  Received  $1,342.60 
from  < '.  P.  Dalton  &  Sons  an  account  and  allowed  :"  .  discounl  on  bal- 
ance of  bill  of  Dec.  12,  $1,370.       19a 

46a.  Dec.  24.     Received  a  60  daj  note  for  $1,562.50  at  ii\    from  C.  P.  Dalton 

&  Son  on  account.     I  24a.) 


BOOKKEEPING  AND  ACCOUNTING  It) 

47a.  Dec.  24.     Paid  our  $5,000  note  ;it  Central  National  Bank  by  giving  a  new 

note  tor  $3,500  at  6%  for  60  days  and  a  cheek  for  $1,535  for  the  dif- 
ference including  the  interest  on  the  new  note. 
Debit  Notes  Payable  $5,000  because   we   received  our  note.     Debit  Interest  ami   Dis- 
count $oo  for  the  interest  paid  in  advance  on  the  new  note  (Rule  5).     Credit  cash  $1,535, 
and  Notes  Payable  $3,500  for  the  new  note. 

48a.  Dec.  26.     W.  J.  Goodnow  returned  $50.75  of  the  money  drawn  on  Decem- 
ber '22,  for  private  use.     (Debit  cash  and  credit  W.  J.  Goodnow  Personal.. 
See  Proprietor's  Personal  Account,  paragraph  8.) 

49a.  Dec.  27.  Paid  W.  II.  Martin  &  Go.  $2,071.7:!  on  account,  and  received 
3'/,  discount  on  invoice  of  December  11.  Paid  Glass  &  Bryant  $2,522.44 
on  account  and  received  3'/  discount  on  balance  of  invoice  of  December 
11,  $2,600.45.  (28a.  Refer  to  your  Ledger  accounts  to  determine  what 
tlie  balance  is,  on  which  to  calculate  the  •'!',    discount.) 

50a.  Dec.  27.  Paid  office  help  for  the  week,  $172.50.  Paid  sales  force  for 
the  week,  $275.80.     Paid  delivery  drivers  for  two  weeks,  $110. 

51a.  Dec.  28.     Received  $872.50  for  sundry  cash  sales. 

52a.  Dec.  28.  W.  J.  Goodnow  withdrew  $1,000  from  his  investment.  (Debit 
W.  J.  Goodnow,  Capital.    See  paragraph  8.) 

53a.  Dec.  29.     Paid  Warner  Bros.  $950.75  on  account.    No  discount. 

54a.  Dec.  29.  Sold  to  C.  P.  Dalton  &  Ron,  2/15,  n/30,  125  cs.  D.  Peaches  (5) 
$6.35,  75  cs.  No.  1  Raisins  @  $5.75.  Sold  to  W.  H.  Draper  &  Co.,  2-15, 
n/30,  115cs.  R.  Raspberries  @  $5.95,  65  brls.  P.  B.  Flour  @  $9.85. 

55a.  Dec.  30.  Allowed  W.  II.  Draper  &  Co.  $47.85  for  damaged  goods  on 
bill  of  December  23.     (12a.) 

56a.  Dec.  31.  Purchased  of  W.  II.  Martin  &  Co.  merchandise  as  per  Invoice 
No.  7,  3/15.  n  90,  $1,135.75. 

57a.  Dee.  31.  Post  the  books  to  date:  Before  beginning  to  post,  look  over 
all  the  journal  entries  to  see  that  they  are  each  in  balance.  After  posting, 
take  a  Trial  Balance.  Before  beginning  the  Trial  Balance,  go  over  all 
the  Ledger  accounts,  and  total  each  side  of  each  account,  of  more  than 
one  item,  in  very  small  pencil  footings,  close  under  the  last  entry  so  these 
figures  will  be  out  of  the  way  of  any  entry  that  may  be  made  on  the 
next  line.  These  small  figures  are  not  erased,  as  they  will  save  addi- 
tion  later. 

Find  the  difference  between  the  two  sides  of  each  account  that  has 
both  debits  and  credits,  and  place  this  difference  on  the  larger  side,  close 
under  the  line  in  the  explanation  column.  Now,  preparing  the  Trial 
Balance  is  a  simple  matter  of  writing  the  accounts  and  placing  these 
debit  balances  in  the  debit  column,  and  the  credit  balances  in  the  credit 
column. 

Exception:  Enter  both  sides  of  Purchases  account  and  Sales  account 
in  the  Trial  Balance,  but  use  the  differences  in  all  the  other  accounts. 
The  credit  side  of  Purchases  shows  the  "Returns  and  Allowances"  from 
purchases.  The  debit  side  of  Sales  account  shows  the  "Returns  and 
Allowances"  from  sales.  As  these  are  used  in  preparing  the  Profit  and 
Loss  Statement,  it  is  convenient  to  show  both  sides  of  Purchases  and 
Sales  accounts  in  the  Trial  Balance.  Where  the  volume  is  large,  separate 
accounts  may  be  kept  for  "Purchases  Returns  and  Allowances''  and 
for  "Sales  Returns  and  Allowances." 


20  BOOKKEEPING  AND  ACCOUNTING 

The  following  illustrations  show  aboul  one-half  of  the  journal  entrie 
this  set,  which  arc  most  all  of  the  various  kinds,  and  will  enable  the  student 
to  prepare  the  remainder  without  further  aid.  The  Ledger  accounts  show  the 
posting  as  it  should  be  when  the  complete  Journal  is  posted.  The  Capital 
accounts  and  Cash  account  are  shown  closed,  as  a  guide  in  closing  these  ac 
counts  when  instructed  to  do  so.  [f  the  Cash  accounl  were  to  be  transferred 
to  a  new  page,  the  balance  would  be  carried  to  the  debit  side  of  the  new  ac- 
count instead  of  bringing  it  down  beloTK  the  rule, I  lines. 

By  following  the  instructions  and  illustrations  in  paragraphs  27  to  10 
inclusive,  the  student  can  easily  record  the  adjusting  journal  entries  in  the 
Journal  and  post  them  and  take  the  Final  Trial  Balance,  and  record  the  closing 
entries  and  post  them,  closing  and  ruling  the  Nomina]  Accounts.  Every  step 
is  made  easy. 

The  Journal  is  a  book  of  original  entry.  Arranging  the  transaction  in 
the  form  of  a  journal  entry  is  called  "Journalizing."  Journalizing  is  a  mental 
process  of  analyzing  transactions  to  determine  the  debits  and  credits.  This 
mental  analysis,  to  decide  what  are  the  debits  and  what  are  the  credits,  must 
take  place  before  recording  transactions  in  any  other  booh  of  original  entry,  as 
well  as  the  Journal.  Hence,  the  journal  entry  of  any  transaction  must  be 
visualized  before  it  can  be  recorded  intelligently  in  a  Cash  Book,  Purchases 
Book,  or  Sales  Book.  The  application  of  the  principles  of  debit  and  credit,  as 
illustrated  by  the  journal  entry  in  this  and  the  preceding  chapter,  to  other 

1 ks  of  original  entry  is  illustrated  in  Chapter  IV  and  chapters  following 

thereafter. 


BOOKKEEPING  AND  ACCOUNTING 


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ILLUSTR  \TIUN   NO.   tfl 


"J7.  Saving  the  Trial  Balance,  the  student  is  required  to  prepare  and  post 
journal  entries  to  provide  for  the  following  inventories,  and  then  take  a  Final 
Trial  lialance  het'ore  closing  tin-  hooks. 

Merchandise  Inventory .  Dec.  31  sit'.. lie1. si 

Expired  [nsurance  22.50 

Depreciation,  Reserves,  Accruals  and   Deferred   [terns. 

Accrued  Assets: 

I  nl crest  paid  in  advance  on  loan  at  bank $30.92 

[nteresl  accrued  on  Notes  Receivable 5.32 

Accrued  Liabilities: 

Renl    for  half-] itli   on   house  and   lol   belonging   to   next 

period    $62.50 

[nteresl  accrued  on  Notes  Payable 12.59 

Unpaid  office  help  for  half  week 86.25 

Unpaid   sales    force    for   half-week 137.90 


Unpaid  delivery  drivers  for  half-week. 


50 


BOOKKEEPING  AND  ACCOUNTING 


31 


Deferred  Charges  to  Operation: 

Office   stationery   on   hand $37.50 

Advertising  matter  on  hand 72.50 


Depreciation 

10', 
l.V, 
4%   on 


on  Office    Equipment $  55. (IS 

on  Delivery  Equipment    127.50 


House,  16S  Park  Ave. 


190.00 


Reserve  for  Doubtful  Acounts: 

4','    of  debit  balance  of  Acounts  Receivable 


.$213.24 


28.  The  Trial  Balance  represents  the  results  or  facts  of  the  bookkeeping, 
as  shown  by  the  Ledger  acounts,  but  the  above  inventories  are  supplementary 
facts  not  found  in  the  Ledger  acounts,  which  materially  affect  the  profits  and 
losses  of  the  business.  They  must  be  recorded  in  the  books  before  the  exact 
profit  or  loss  can  be  determined.  The  following  journal  entries,  when  posted, 
will  record  these  items  in  the  books  and  adjust  the  Ledger  acounts  that  are 
affected: 


^sr- 


Ldmlnlstratlve  Expense 
Insurance 


Accrued  Assets 

Interest  and  Dlsoonnt 


To  oharge  this  aooount 
with  Insurance  expired 


-31- 


For  Interest  accrued  and 
Interest  paid  in  advance. 


Real  Estate  Expense  and  Inoone 
Interest  and  Disoount 
Administrative  Expense 
Selling  Expense 
Delivery  Expense 

Accrued  Liabilities 


-31- 


Rent  oollected  for  next 
period.  Interest  acorued 
on  Notes  Payable.  Unpaid 
offioe  help,  sales  foroe. 
and  delivery  drivers. for 
one-half  week 


-31- 


Deferred  Charges  to  Operation 
Administrative  Expense 
Selling  Expense 


Offioe  stationery  and  Ad- 
vertising matter  on  hand. 


-31- 


Admlnlstratlve  Expense 
)elivery  Expense 
Heal  EBtate  Expense  and  Inoome 
Reserve  for  depredation  on 

Office  Equipment 
Reserve  for  depreciation  on 

Delivery  Equipment 
.Reserve  for  depreciation  on 
House,  168  Park  Ave 


To  oharge  Admin.  Expense 
10vS  depreciation  on  Of- 
fioe Equipment,  Delivery 
Expense  15%  on  Delivery 
Equipment,  and  Real  Es- 
tate Expense  and  Income 
i%  on  House,  and  to  set 
up  Reserve  Aooonnts. 


-31- 


Loss  on  Doubtful  Acoounts 

Reserve  for  Doubtful  Aoota 


for  4"S  of  Aocounts  Re- 
ceivable, as  estimated 
loss . 


22 

50 

22 

BO 

36 

24 

36 

24 

62 

50 

12 

59 

86 

25 

137 

90 

27 

50 

326 

74 

110 

DO 

37 

50 

72 

50 

55 

06 

127 

50 

190 

00 

55 

Ob 

127 

50 

190 

00 

213 

24 

213 

24 

ILLUSTRATION   NO.   20.      ADJUSTMENT   JOURNAL    ENTRIES 


Enter  the  above  journal  entries  in  the  Journal  and  post  them  to  the  Ledger 
accounts,  then  take  a  Final  Trial  Balance  before  closing. 

29.  Comments:  Merchandise  inventory  Dec.  31.  $16,462.81  is  left  until  the 
Trading  Accounts  are  closed.  The  Insurance  expired,  $22.50  ($270  divided  by 
12)  is  the  part  of  the  insurance  used  for  one  month.     When  recorded  it  leaves 


;;•_-  BOOKKEEPING  AND  ACCOUNTING 

-  '17. 50  unexpired  insurance  as  an  asset.  (See  first  entry  in  illustration 
No.  20.) 

29a.  [nteresl  accrued  on  Notes  Receivable,  $3.32,  belongs  to  this  period, 
I, ut  cannol  be  received  until  collected  in  the  nexl  period.  Interesi  paid  in 
advance  on  loan  at  the  bank  was  $35  for  60  days,  bul  only  7  days  of  it,  $4  08, 
belongs  to  this  period,  leaving  $30.92  belonging  to  the  nexl  period.  These 
are  accrued  Assets.     (See  second  entry  in  illustration  No.  . 

29b.  One-half  the  renl  collected  on  bouse,  168  Park  Ave.,  $62.50,  belongs 
to  the  next  period,  hence,  it  is  a  liability  of  this  period.  The  unpaid  office 
help,  sales  force  and  delivery  drivers  for  one-half  week,  are  liabilities  of  tins 
period.    These  are  Accrued  Liabilities.    (See  third  entry  in  illustration  No.  20.) 

29c.  Office  stationery  on  hand  was  charged  to  Administrative  Expense, 
but  $37.50  of  it  will  be  used  in  the  next  period,  so  it  must  be  taken  oul  of 
Administrative  Expense  for  this  period.  Advertising  matter  on  hand,  $72.50, 
has  been  charged  to  Selling  Expense,  but  will  be  used  in  the  next  period,  so 
it  must  be  taken  out  of  the  Selling  Expense  for  this  period.  See  fourth 
entrj 

29d.  Depreciation  is  an  expense,  or  loss  from  use  and  age,  and  each  period 
must  stand  its  pari  of  it.  Depreciation  on  Office  Equipmenl  is  an  Adminis- 
trative Expense,  so  debit  this  account  $55.08.  Depreciation  on  Delivery  Equip- 
ment is  a  Delivery  Expense,  so  debit  this  account  $127,50.  Depreciation  on 
House.  168  Park  Ave.,  is  a  real  estate  expense,  so  debit   Real  Estate  Expense 

and  Income  ; mint  $190.    Credil  the  "Reserve"  accounl   for  each  of  these 

properties  for  the  amount  of  depreciation  on  each.     (See  fifth  entry. 

29e.  Loss  on  Doubtful  Accounts:  Experience  has  proved  that  it  is  un- 
usual to  be  abb'  to  collect  in  full  from  all  customers.  Some  will  not  pay  and 
some  will  not  pay  all  they  owe  us.  This  causes  a  loss.  It  is  not  possible  to 
know  exactly  what  this  loss  will  be.  so  it  is  a  conservative  practice  to  retain 
pari  of  the  profits  to  cover  1  his  probable  loss,  instead  of  letting  it  go  into 
Profil  and  Loss  accounl  as  a  profil  or  be  paid  out  in  dividends,  while,  in  fact, 
it  is  a  loss.  A  "Reserve  for  Doubtful  Accounts'"  account  is  set  up  to  provide 
for  this  estimated  loss.  The  amount  is  decided  by  the  management,  based 
upon  past  experience.  It  may  be  -'.  or  7>',  of  Accounts  Receivable.  Us- 
ually it  is  more  than  the  actual  loss  on  bad  debts  for  the  past  year,  in  order 
to  be  sure  to  cover  all  loss  probable  on  bad  debts.  To  set  up  this  "Reserve," 
debil  "Loss  on  Doubtful  Accounts"  and  credit  "Reserve  for  Doubtful  Ac- 
counts," without  waiting  to  see  what  debts  are  going  to  be  bad  debts.    This 

does    nol    disturb   the    Accounts    Receivable,    and    yet    it    records    the    estimated 

loss  in  the  period  to  which  it  belongs.    'See  sixth  entry.) 

29f.    If.  al    a   later  date,  any   customer  utterly  fails  or  his  account    is   found 

to  lie  uncollectible,  a  journal  entry  is  made  to  close  his  account.  Debil  "Re- 
serve for  Doubtful  Accounts"  and  credit  the  customer's  account  to  close  it. 
This  makes  it  unnecessary  to  sro  back  into  the  bookkeeping  and  adjust  the 
profits  for  the  year  or  period.  The  purpose  of  these  comments  is  to  aid 
in  the  study  id'  the  foregoing  journal  entries. 

29g.  When  tin1  foregoing  journal  entries  have  been  recorded  and  posted, 
the  Pinal  Trial  Balance  should  be  as  follows: 


BOOKKEEPING  AND  ACCOUNTING  33 

Final  Trial  Balance   before   oloalng.    W.    J.    Goodnow,    December  31.192 


1 

W.  J.  Goodnow,  Capital 

16000 

00 

2 

W.  J.  Goodnow.  Personal 

154 

15 

A 

3 

Cash 

3061 

50 

A 

4 

Notes  Receivable 

2562 

50 

I 

5 

Notes  Payable 

7097 

50 

A 

6 

Office  Equipment 

550 

75 

A 

7 

Delivery  Equipment 

850 

00 

A 

8 

Real  Estate.  House  and  Lot 

4750  00 

A 

9 

Insuranoe  unexpired 

247  50 

T 

10 

Merchandise  Inventory 

8972  50 

T 

1L 

Furohases 

15353  80 

478 

60 

T 

12 

Furohases  Disoonnt 

235 

91 

T 

13 

Freight  In 

521  65 

T 

14 

Sales 

379  10 

14726 

15 

T 

15 

Sales  Discount 

86  51 

p 

&  L 

16 

Administrative  Expense 

1261  88 

F 

&  L 

17 

Selling  Expense 

1341  15 

F 

&  L 

18 

Delivery  Expense 

488  40 

F 

&  L 

19 

Real  Estate  Expense  and  Income 

166 

25 

P 

Sc   L 

20 

Interest  and  Discount 

23 

65 

A 

S 

Aooounts  Reoe-ivable 

5330 

90 

L 

S 

Aooounts  Payable 

7011 

15 

P 

&  L 

21 

Loss  on  Doubtful  Aooounts 

213 

24 

A 

22 

Acorned  Assets 

36 

24 

L 

23 

Accrued  Liabilities 

326 

74 

A 

24 

Deferred  Charges  to  Operation 

110 

00 

Al 

25 

Reserve  for  Dep.  on  Office  Equipment 

55  iC 

Al 

26 

Reserve  for  Dep.  on  Delivery  Equipment 

127  50 

Al 

27 

Reserve  for  Dep.  on  Real  Estate 

190  00 

Al 

28 

Reserve  for  Doubtful  Accounts 

ILLUSTRATION*  NO.  21.   FINAL  TRIAL  BALANCE  BEI 

213  24 

46461 

87 

46461 

87 

"ORE  CL 

OSIN 

G 

Note:  The  numbers  at  the  left  may  be  the  page  of  the  Ledger  accounts,  or  the  num- 
bers of  the  Ledger  accounts,  if  the  Ledger  is  not  paged,  in  case  a  loose  leaf  Ledger  is 
used. 

30.  The  accounts  marked  "A"  are  assets.  The  accounts  marked  "L"  are 
liabilities.  The  accounts  marked  "T"  are  the  "Trading  accounts."  Those 
marked  "P  &  L"  are  the  Profit  and  Loss  Accounts,  and  those  marked  "Al" 
are  Reserves,  and  are  deductions  from  assets  in  the  Balance  Sheet.  Marking 
the  accounts  in  the  Trial  Balance  in  this  way  is  a  convenience  iu  preparing 
a  Balance  Sheet  and  a  Profit  and  Loss  Statement,  which  is  the  next  step. 

Every  debit  in  a  Trial  Balance  (except  the  Capital  accounts)  is  either  an 
asset  or  a  loss,  and  every  credit  is  either  a  liability  or  a  gain. 

Merchandise  Inventory,  at  the  end  of  a  fiscal  period,  is  both  a"Trading 
Account"  and  an  Asset.  It  is  an  asset  for  the  next  period,  and  must  be  used 
as  a  "Trading  Account"  in  this  period  to  ascertain  the  "cost  of  goods  sold." 

From  this  '•Final  Trial  Balance."  prepare  a  Balance  Sheet  and  a  Profit 
and  Loss  Statement. 

31.  The  "Trading  Accounts"  and  the  "Profit  and  Loss"  accounts  are 
called  the  "Nominal  Accounts,"  so  called  because  they  are  not  permanent. 
They  are  always  closed  at  the  end  of  a  fiscal  period  in  order  to  ascertain  the 


34 


I'.ooKKKKl'IXfi    AND   At  C01  NTING 


gain  or  loss.     The  other  accounts  are  no1   closed  ami  are  called  "real"  or 
"permanent"  accounts  (assets  ami  liabilities). 

The   "Trading   ami    Profit    ami    Loss   Statement"   i-*   prepared    from   the 
Trading  ami  Profil  ami  Loss  accounts.    The  Balance  Sheel  is  prepared  from 
the  real  or  permanenl  accounts,  the  assets  and  Liabilities.    Prepare  a  Balance 
;  ami  Profil  ami  Loss  Stafemenl  from  these  two  sets  of  accounts,  as  fol- 
lows : 


Exhibit 


Balanoe  Sheet.  W.  J.  Goodnow.  December  31.  192 


$5330.90 
213.24 


$560.75 

55.08 

650.00 

127.50 

4750.00 
190.00 


316000.00 
154.15 


Current  and  Aoorued  Assets. 

Cash 

Rotes  Receivable 

Accounts  Receivable 

Lesa.  Res.  for  Doubtful  Accounts 
Aocrued  Assets 
IZerohandlse  Inventory.  Dec.  31 

rota!  Current  and  Acorued  Assets 

Deferred  Assets 

Insuranoe  ( unexpired i 
Office  Stationer;,-  on  hand 
Advertising  Matter  on  hand 
Total  Deferred  Assets 

Fixed  Assets 

Office  Equipment 

Less  Reserve  for  Depreciation 
Delivery  Equipment 

Less  Reserve  for  Depreciation 
Real  Estate,  House  and  Lot 

Less  Reserve  for  Depreciation 

Total  Fixed  Assets 
Total  Assets 

Current  and  Accrued  Liabilities. 

Notes  Payable 
Aooounts  Payable 
Accrued  Liabilities 

Total  Liabilities 

W.  J.  Goodnow's  Present  Capital 

Represented  by 

w.  J.  Coodnows  flet  Investment 
Less  his  Personal  Account 

Add  Bet  Profit  for  the  Period 


ILLUSTRATION  NO.  22.   BALANCE  SHEET   STATEMENT  OP 


3061  50 

2562  60 

5117  66 

36  24. 

16462  81 


27240 


24  7  50 
37  60 
72   50 


i'jb    67 

7;1;'    5C 

456C00 


15845 

3095 


16940 


Tin;  business 


357 


71 


50 


6776 


r. 


33376   ?b' 


7097    $C 

7011    15 

326    74 


1443639 
TPT540  95 


99      18940 


99 


Note:  This  Balance  Sheet  should  prove  with  the  Profit  and  Loss  Statement.  <m 
servo  that  only  the  Assoi  accounts,  Liability  accounts,  and  tin'  C.-i|iit:il  accounts  are 
used. 


BOOKKEEPING  AND  ACCOUNTING 


35 


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36 


nooKKEEPlXCi   AND  ACCOUNTING 


Exhibit  B.  Profit  and  Lose  Statement. 

V. 

J  Goodnov,  December  31 

,  192 

Sales 

Less  Sales  Returns  and  Allowanoes 
Sales  Disoount 

14726  15 
|379  10 

66.51    465  61 

14260 

54 

Ket  Sales 

Cost  of  Sales 

Merchandise  inventory.  Deo   1 
Purchases 
Less  Purchases  Returns 

and  Allowanoos 
Purohases  Discount 


|476.60 
235.91 


*15353.8f, 
714.51 


89  72  50 


m  39TZS 


Add  Freight  In 

net  Cost  of  all  Merchandise 
Less  lldse.  Invt   Deo   31 
Cost  of  Goods  Sold 

Gross  Profit  on  Sales 
(85  91fo  of  Cost.   46.21?,  of  Sales) 

Operating  Expenses 

Administrative  Expense 

(16.44??  of  Cost   8.85$  of  Sales) 


521.65  15160  94 
24133  44 
16462  61 


Tt.?.: 


6589 


Selling  Expense 
(17.46;?  of  Cost 

Delivery  Expense 
(6.3715  of  Cost. 


9  41#  of  Sales l 


1261  86 

1341  15 

488  40 


63 


n 


3.42/,  of  Sales) 
Total  Operating  Expenso 
(21.68/,  of  Sales) 
Gross  Income 

Deductions  from  Income 

Interest  and  Disoount 

Real  Estate  Expense  and  Inoome 

Loss  on  Doubtful  Aocounts 

Bet  Profit  or  Inoome  (Exhibit  A) 

(21.7%  of  Sales.   19.34?,  of  Investment) 

PROOF 

W.  J.  Coodnows  Present  Capital  (Exhibit  A) 

W  J.  Goodnows  investment  §16000.00 

Less  his  Personal  Aooount  154.15   15845  85 

Add  Het  Profit  3095  14 


23  65 
166  25 
213  24 


3091  43 
349R  48 


403  34 


309E 


14 


18940  99 


18940  99   18940  99 


ILLUSTRATION    NO.    24.      COMBINES    TRADING    AND    PROFIT    AND    LOSS    STATEMENT 

Note:      Tin'    iii-t    pari    "i    thi      P  tement,   which    shows   the   "G 
Profit  mi  Sales"  is  the  Trading  Section  of  the  Statement   »itli   which   tin.  Trading  Sec- 
tion  i'f   iln'   I'nilit   and    Loss  account    conforms.     See    separate   Trading   State at,   QIub- 

tration  No.  30. 

32.  Deductions  from  Income:  Such  items  as  Interest  paid,  Real  Estate 
Expense,  Collection  and  Exchange,  the  estimated  Loss  on  Doubtful  accounts, 
etc.  are  considered  non-operating  expenses,  thai  is,  they  are  no1  expenses  in- 
curred in  tin-  actual  trading  ami  conducting  of  the  business,  hence,  they  are 
qo1  included  with  the  operating  expenses,  bul  deducted  from  the  "Net  Busi- 
ness Profil  '*  or  "Gross  Income." 

32a.  It  is  very  interesting  in  note  thai  the  Balance  sheet  is  prepared  from 

■  ■He  v,.j  of  a units  mIh'  asset  accounts  ami  Liability  accounts)  of  the  Pinal 

Trial  Balance,  ami  the  Profil  ami  Loss  Statement   i-*  prepared  Erom  an  en- 


BOOKKEEPING  AND  ACCOUNTING 


37 


tirely  different  set   of  accounts    (the   Nominal  Accounts)    and  yet  the  two 
statements  agree,  and  show  the  same  final  result. 

32b.  The  foregoing  statements,  the  Balance  Sheet  and  Profit  and  Loss 
Statement,  are  standard  forms  approved  by  the  Federal  Trade  Commission 
and  the  American  Institute  of  Accounts.  These  forms  can  be  adapted  to  the 
varying  conditions  of  a  business  without  change  in  form.  They  contain  all 
the  information  required  to  make  up  an  Income  Tax  Report.  After  the  In- 
come Tax  Report  is  prepared,  detailed  statements  may  be  prepared  to  recon- 
cile any  expense  account  that  could  not  be  itemized  on  the  report,  and 
schedules  of  any  other  amount  that  may  be  called  for.  These  analysis  sheets 
or  schedules  are  numbered  to  identify  them,  and  are  attached  to  the  report 
at  the  proper  place. 


Exhibits,  Schedules,  and  Detailed  Statements  or  Analysis  Sheets. 

33.  An  Exhibit  is  a  statement  of  the  facts  or  conditions  of  the  business, 
as  a  result  of  the  bookkeeping.  The  Balance  Sheet  is  designated  as  Exhibit 
A,  and  the  Profit  and  Loss  Statement  as  Exhibit  B. 

Compare  the  Profit  and  Loss  Statement  with  the  Balance  Sheet,  and  ob- 
serve that  the  one  proves  against  the  other.  The  percentages  shown  in  the 
Profit  and  Loss  Statement  are  information  for  the  management,  in  making 
the  selling  price  for  the  future  and  in  watching  the  operating  expenses. 

Further  information  should  be  furnished.  The  total  of  Administrative 
Expense,  $1,261.88,  and  Selling  Expense,  $1,341.15,  are  shown  in  Exhibit  B 
in  one  amount  in  each  case.  The  management  would  like  to  know  of  what 
these  expenses  consist.  The  following  detailed  statement  or  analysis  is  sub- 
mitted. 

Details  supporting  Admlnist ratlve  Expense  and 
Selling  Expense  of  Exhibit  B.  Dec.  31.  192 


Detail  1 ; 

Administrative  Expense. 

Blank  Books  and  Stationery 

Less  refund  $8.75 

"   balance  on  hand    37.50 


$104.30 
46.25 


Offioe  help  for  four  weeks 
Rent  of  Store  Building 
Unpaid  office  help,  half  week 
Insnranoe 

Depreciation  on  Offioe  Equipment 
As  shown  by  Exhibit  B 


58 

690 

350 

86 

22 

55 


05 

00 
00 
25 

50 

06 


Detail  2: 


Selling  Expense: 

Printing  advertising  matter 
Less  refund  J12.75 

"  Adv.  matter  on  hand  72.50 
Payroll,  sales  force  four  weeks 
Unpaid  payroll,  half  week 

As  shown  by  Exhibit  B 

ILLUSTRATION1   NO.    25.      DETAILED   STATEMENT   OR    ANALYSIS   SHEET 


1186.30 
85.25 


100  05 
1103  20 


1261 


137 


90 


1341 


88 


15 


38  BOOKKEEPING   AND  At  COUNTING 

34.  Schedules  are  usually  designated  by  numbers,  as  Schedule  1,  Sched- 
ule 2,  ami  so  on  for  whatever  number  are  ssary.     A  Schedule  is  a  list 

to  reconcile  1 1 1 « -  amount  shown  by  an  ai inl  in  tin-  Balance  sheet,  as  Mei 

chandise   [nventory,   Notes   Receivable,   Notes  Payable,  Accounts   Receivable, 

Accounts  Payable.    The  following  Schedules  will  reconcile  or  prove  A unts 

K'eeeivalile.  .*.">. 1 1 7. tin",  and  Accounts  Payable,  $7,011.15,  in  Exhibit  A. 


Schedule  1.    Accounts  Receivable : 

C.  I'.  Dalton  a  Son $l,05i 

\v.  II.  Draper  ,v  Co l'.77i',.i;:, 

W.  II.  Marsh  &  Co 1,504.25 


5,3 
i  Eti  sei  i  e  for  Doubtful  accts.     213.24 


Schedule  2.  Accounts  Payable : 

\V.  II.  Martin  &  Co $1,135.75 

Warner  Bros :;,|s:,.7:, 

i  &   Bryant    2,38 

As  shown  by  Kxliil.it  A $7,011.15 


As  shown  in  Exhibit  A $5,117.66 

ILLUSTRATION     NO.    2ft       RECONCILIATIONS    OP     ACCOUNTS     RECEIVABLE     AM'      ACCOUNTS 

r  \  i  una-: 

Note:  Such  papers  as  shown  in  Illustrations  Nos.  22  or  23,  24,  25  ami  26 
should  he  submitted  to  the  managemenl  at  the  end  of  each  fiscal  period.  Such 
papers  as  Illustrations  Nos.  25  and  26,  should  be  submitted  each  month,  to- 
gether with  any  information  that  the  nature  of  the  business  will  permit  of  be 
iiifr  prepared.  The  amount  deposited  and  the  cash  balance  should  be  sub- 
mitted every  morning.  In  submitting  the  Schedules  of  Notes  Receivable, 
Notes  Payable.  Accounts  Receivable  and  Accounts  Payable,  the  due  date  of 
each  item  should  be  shown  in  the  schedule.  This  information  will  enable  the 
management  to  think  intelligently  of  the  affairs  of  the  business. 

35.  Close  the  Ledger:  The  Ledger  is  closed  at  the  end  of  each  "Fiscal 
Period"  (Paragraph  24>.  "Closing  the  Ledger"  or  "Closing  the  Hooks" 
means  to  close  the  "Nominal  Accounts"  (Trading  accounts  and  the  Profit 
and    Loss   Accounts)    into  a   "Profil    ami    Loss  account    which    is   opened    in   the 

Ledger.     The  purpose   is  thai    the   Ledger   may   show   the  condition   of  the 

business  as  exhibited  by  the  Balance  Sheet  and  the  Profit  and  Loss  State- 
ment. Another  object  is  to  eliminate  the  "Nominal  Accounts"  at  the  end 
of  the  period,  because  they   have  served  their   purpo-e. 

35a.  Only  the  "Nominal   Accounts"  are  closed,   leaving  the   Assel    i  l>e- 

SOUrce)    accounts.    Inability    accounts    and    the    Capital    accounts    open    which 

must  agree  with  the  accounts  shown  in  the  Balance  sheet. 

35b.  Journal  Entry  Method:  There  are  two  methods  of  closing  the 
Ledger:  the  "direct  transfer  method"  and  the  "journal  entry  method." 
The  results  would  be  the  same  in  either  ease,  but  the  "journal  entry  method" 
is  preferred,  because  it  is  better  lo  have  a  journal  entry  record  of  every  trans- 
fer  made   in    the    Ledger   accounts. 

:!.">(•.  To  close  an  account  il  is  necessary  to  place  an  amount  on  the  smaller 
side   sufficient    to   balance    the   account.      This   closes   the    account.      A    separate 

journal  entry  maj  be  made  to  close  each  account,  but  it  is  just  ;is  simple  to 
close  the  accounts  thai  have  a  credit  balance  with  one  journal  entry,  ami  to 

close  tlie  accounts  that  have  a  debit  balance  with  one  journal  entry.  The 
latter  method  is  used  especially  if  it  is  desired  to  show  the  "Trading  See- 
lion"  and  tin'  "Profil  and  Loss  Section"  in  the  "Profit  and  Loss"  account. 
Both   methods  are  shown   in  this  hook.     The   following  journal   entries  and   in- 


BOOKKEEPING  AND  ACCOUNTING  39 

structions  will  close  the  books  so  as  to  show  the  "Trading  Section"  and  the 
"Profit  and  Loss  Section."  Close  the  Trading  accounts  first.  The  student 
will  record  the  following  closing  journal  entries  in  the  Journal  and  posl 
them. 

35d.  Close  the  Trading-  Accounts  by  Journal  Entries:  To  close  the  ac- 
counts that  have  credit  balances,  debit  each  account  for  a  sufficient  amount  to 
make  both  sides  equal.  The  credit  of  "Sales"  account  is  $14,347.05.  The  credit 
balance  of  "Purchases  Discount"  account  is  $235.91.  Debit  each  of  these  ac- 
counts for  these  amounts  respectively,  and  when  the  journal  entry  is  posted. 
these  accounts  will  be  closed.  Debit  •'.Merchandise  Inventory"  $16,402.81  to 
set  up  the  present  inventory. 

Sales    $14,347.05 

Purchases    Discount    235.91 

Merchandise   Inventory,    Dei-.    31 16,462.81 

Profit  and  Loss   .  .' $31,01-"".. 77 

To  close  the  first  three  accounts  into  the  Profit  and  Loss  account,  and  set  up  the  present 
Merchandise  Inventory. 

Iii  posting  this  journal  entry,  instead  of  posting  the  $31,045.77  in  one  amount 
to  the  credit  of  Profit  and  Loss  account,  itemize  this  amount  on  the  credit  side : 
Sales  $14,347.05,  Purchases  Discount,  $235.91,  Merchandise  Inventory,  Dec. 
31,  $16,462.81,  as  shown  in  Illustration  No.  27.  The  purpose  is  to  have  the 
Trading  Section  or  first  part  of  the  Profit  and  Loss  account  conform  to  the  first 
part  or  Trading  Section  of  the  Profit  and  Loss  Statement. 

35e.  To  close  the  Trading  Accounts  that  have  a  debit  balance,  credit  each 
account  for  a  sufficient  amount  to  make  both  sides  equal.  The  debit  balance 
of  Purchases  account  is  $14,875.20.  The  debit  balance  of  Sales  Discount  is 
$86.51.  The  debit  balance  of  Freight  In  is  $521.65.  Credit  each  of  these  ac- 
counts for  these  respective  amounts.  Credit  "Merchandise  Inventory" 
$8,972.50  to  close  the  old  inventory.  Debit  Profit  and  Loss  for  the  total  of 
these  amounts. 

Profit  and  Loss  $24,455.86 

Purchases     $14,875.20 

Sales  Discount    86.51 

Freight  In   521.65 

Merchandise    Inventory,    Dec.    1 8,972.50 

To  close  these  accounts  into  Profit  and  Loss  account,  thus  closing  out  the  old  Mer- 
chandise Inventory  at  the  beginning  of  the  period. 

Instead  of  posting  the  $24,455.86  in  one  amount  to  the  debit  of  Profit  and 
Loss  account,  itemize  it  on  the  debit  side:  Purchases  $14,875.20,  Sales  Dis- 
count $86.51,  Freight  In  $521.65,  Merchandise  Inventory  Dec.  1,  $8,972.50. 
The  purpose  is  to  have  the  Trading  Section  of  the  Profit  and  Loss  account  (Il- 
lustration No.  27)  show  the  items  as  they  appear  in  the  Trading  Section  of  the 
Profit  and  Loss  Statement.  Observe  that  when  the  two  foregoing  entries  are 
posted,  the  Trading  Section  of  the  Profit  and  Loss  account  is  completed  ami 
shows  the  same  results  as  the  Trading  Section  of  the  Profit  and  Loss  State- 
ment. Illustration  No.  24,  or  the  separate  Trading  Statement,  Illustration 
No.  30. 

35f.  Close  this  "Trading  Section"  of  the  Profil  and  Loss  account  b\  en 
tering  in  red  ink  on  the  debit  side  •'({ross  Profit,  $6,589.91,"  and  rule  and  foot 


Hi  BOOKKEEPING  AND  A.I  COUNTING 

the  Trading  Section,  then  transfer  this  amount  to  the  credil  side  below  tnc 
ruled  lines  to  tlic  Profil  and  Loss  Section  as  Bhown  in  Illustration  No.  27. 

35g.  To   close   the    Profil    and    Losa  accounts   into   the    Profit    and   Loss 
count,  debil   Profil  and   Loss  and  credil  each  account  for  the  amount  re- 
quired tn  balance  and  close  it.     It'  some  of  these  accounts  had  debit  balances 
and  some  credil  balances,  two  journal  entries  would  be  used. 

Profil  Li    -  $3,494.77 

Administrative    Expense    •    1,261.88 

Selling  Expense    1,341.15 

Delivery  Expense    4S> 

[nti  n  -t   and    I  discount     

Real   E           I      ense  and  Income  16fi. 25 

Loss  on  Doubtful  aV< nuts  213.24 

To  close  the  Profil  and  Loss  acci  and  Loss  account. 

Instead  of  posting  the  $3,494.77  i le  amount  to  the  debit  of  Profil  and  Loss 

account,  itemize  il  on  the  debit  side.  Administrative  Expense  $1,261  88,  Sell- 
ing Expense  $1,341.15,  Delivery  Expense  $488  K),  and  so  on.  Sec  Illustration 
No.  27.    The  purpose  is  to  bave  the  Profil  and  Loss  Section  (the  second  part 

of  the  Profil  and  Loss  accounl  show  the  items  as  they  appear  in  the  Profit  and 
Loss  Statement,  Illustration  No.  24. 

36.  \Y.  .1.  (Joodnow  instructs  you  to  dose  bis  Personal  accounl  into  his 
Capita]  account,  and  to  credit  his  Capital  account  with  the  nel  profil  or  sur- 
plus as  shown  by  the  Profil  and  Loss  Statement.    'Phis  requires  a  journal  entry. 

W.  J.  Goodnow,  Capital  $    154.15 

Profit   and   Loss    3,095.14 

\V.  .1.  Goodnow,   Personal    $      154.15 

W.  .1.   G Inow,  Capital    3,095.14 

To  close  the  Personal  accounl   into  the  '  apital  account,  and  to  credit  W.  J.  G inow 

for  the  net   profil    for  the  period. 

When  this  entry  is  posted,  the  Profit  and  Loss  account  will  be  closed,  the 
W.  J.  Goodnow,  Personal  account  will  be  closed,  and  the  ne1  profil  for  the 
period  will  he  credited  to  W.  J.  Goodnow,  Capital 

37.  Close  W.  .1.  Goodnow,  Capital,  in  red  ink  and  bring  the  "Presenl 
•  apital"  down  below  the  double  ruled  lines  on  the  credit  as  shown  in  the 
illustration  of  this  account.  Close  Cash  accounl  in  red  ink  and  bring  the 
balance  of  cash  down  below  the  double  ruled  lines  on  the  debit  side.  Date 
Mies, •  entries  below  the  double  ruled  lines  "Jan.  1."  as  the  accounts  stand 
ready  to  receive  the  new  business  for  January. 

38  The  books  are  now  closed,  thai  is.  the  "Nominal"  accounts  are  closed. 
but  the  real,  personal  and  Capital  accounts  are  left  open.  All  the  accounts 
stand  ready  to  receive  the  new  business  for  the  next  period.  The  student 
will  take  a  "Proof  Trial   Balance"  to  prove  the  closing,  and  compare  this 

balance  with   the  Balance  Sheet. 

39.  When  the  foregoing  closing  journal  entries  are  posted  and  the  instruc- 
tions in  paragraph  37  are  carried  out,  W.  J.  G Inow.  Capital  and  Cash  ac- 
counts will  appear  as  shown  m  the  illustration  of  these  accounts.  The  fol- 
lowing   illustrations    show    how    the    .Merchandise    Inventory.    Purchases    and 


BOOKKEEPING  AND  ACCOUNTING 


41 


Profit  and  Loss  accounts  should  appear  after  the  closing  journal  entries  arc 
posted  and  the  accounts  are  properly  ruled  and  footed.  All  the  other 
Nominal  Accounts  arc  closed,  ruled  and  footed  the  same  as  these  accounts. 


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II.T.rSTRATION'    N'O.    26a.      ACOOUXTS    CLOSED 


I_' 


BOOKKEEPING  AND  ACCOUNTING 


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ILLUSTRATION    NO.    27       PROFIT    AND    LOSS    ACCOUNT.      SHOWING    THE    TTtAIMNM    SEI 
AND     THE     I'liHI'IT     ,\\I>     LOSS     SECTION.        THE     FIRST     PART      IS     THE     TRADING 
SECTION    AND   THE    LAST    PART    IS    THE    PROFIT    AND    LOSS    SECTH 

40.  (lose  Accrued  Assets,  Accrued  Liabilities  and  Deferred  Charges  to  Op- 
eration accounts.  The  next  step  after  "Closing  the  Ledger"  is  to  transfer  the 
items  posted  under  these  accounts  back  to  the  operating  accounts  that  arc  af- 
fected. This  requires  a  journal  entry  for  each  account,  which  is  just  the  op- 
posite of  the  adjustment  journal  entries  under  Paragraph  28.  As  these  items 
belong  in  the  next  period,  date  these  journal  entries  January  1. 

January   1 .    192 


Interest  and  Disoount 
Aoomed  Assets 


Aocrued  Liabilities 

Interest  and  Disoount 
Administrative  Expense 
Selling  Expense 
Delivery  Expense 
Heal  Estate  Expense 
and  Income 


To  olo3e  Aoorued  Assets 
aooount  and  transfer 
this  Item 


To  olose  Aoorued  Liabil- 
ities and  transfer  these 
items  to  the  accounts  af- 
feoted 


Administrative  Expense 
Selling  Expense 

Deferred  Charges  to 
Operation 


-1- 


To  olose  Deferred 
Charges  to  Operation 
and  transfer  these 

items. 


36 

24 

36 

24 

326 

74 

12 

59 

86 

25 

137 

JO 

27 

BO 

62 

50 

37 

50 

72 

50 

110  1 

)0 

rRATION    NO.     28.       JOURNAL     ENTRIES    To    TRANSFER      ACCRUALS     AND 
mi   MS     PO    ini:   OPERATING    ACCOUNTS     EFFECTED 

Record  the  above  journal  entries  in  the  Journal  and  posl  them.  Instead 
nf  posting  $326.74  in  one  amount  to  the  debit  of  Accrued  Liabilities,  itemize 
it  mi  the  debit,  writing  the  names  of  the  items  in  the  explanation  column.  In- 
terest and  Discount,  $12.59,  Administrative  Expense,  $86.25,  and  so  on.  Do 
the  same  with  Deferred  Charges  to  Operation.  Rule  and  fool  these  three  ac 
counts  thai  are  closed. 


BOOKKEEPING  AND  ACCOUNTING  43 

41.  Take  a  proof  Trial  Balance:  If  tin-  foregoing  instructions  have  been  prop- 
erly carried  out,  the  Proof  Trial  Balance  should  appear  as  follows: 

W.  J.  Goodnow,  Capital $18,940.99 

Cash    *  3,061.50 

Notes  Receivable    2,562.50 

Accounts  Receivable   5,330.90 

Notes  Payable 7,097.5(1 

Accounts  Payable    7,011.15 

Insurance   217.50 

( Iffice  Equipment   550.75 

Delivery    Equipment    850.00 

Real  Estate,  House  ami  Lot 4,750.00 

Merchandise  Inventory 16,462.81 

Administrative  Expense 48.75 

Selling   Expense    65.40 

Delivery  Expense 27.50 

Interest  and  Discount 23.65 

Real  Estate  Expense  and  Income   62.50 

Reserve  for  Dep.  on  Office  Equipment  . .  55.08 

Reserve  for  Dep.  on  Delivery  Equipment  127.50 

Reserve  for  Dep.  on  House 190.00 

Beserve  for  Doubtful  Accounts 213.24 

$:33,839.61  $33,839.61 

ILLUSTRATION    NO.   _"l 

Prepare  this  Proof  Trial  Balance  from  the  Ledger  accounts  as  they  now 
stand  in  the  Ledger,  on  journal  paper.    Submit  all  work  for  approval. 

42.  Procedure  in  closing  a  Set  of  Books :  The  steps  to  be  taken  in  closing 
the  books  are  as  follows: 

1.  Take  a  Trial  Balance. 

2.  Collect  the  supplementary   facts,  such   as:   merchandise  inventory,  accruals,  and 

deferred  charges  to  operation. 

3.  Ascertain  the  depreciation   on  all  depreciable  assets,  and  the  reserve  to  be  set 

aside  for  doubtful  accounts. 

4.  Record  the  above  (except  merchandise  Inventory  at  the  end  of  the  period)  in  the 

books  by  journal  entries. 

5.  Prepare  a  Final  Trial  Balance  before  closing. 

fi.     Prepare  a  Balance  Sheet  ami  a.  Profit  and  Loss  Statement,  from  the  Final  Trial 
Balance. 

7.  Close  the  "Nominal"  accounts  into  Profit  and  Loss  accounts. 

8.  Close  the  Proprietor's  or  Partner's  Personal  account  into  the  Capital  account  (or 

accounts),   if  required   to  do  so. 

9.  Close  Profit  and  Loss  account  into  the  Proprietor's  (or  Partners)  Capital  account. 

10.  Rule  and  foot  all  accounts  closed,  and  bring  the  Proprietor's  (or  partner's)  Present 

Capital  down  below  the  ruling  on  the  credit  side. 

11.  Take  a  proof  Trial  Balance,  which  proves  with  the  Balance  Sheet. 

Some  accountants  let  this  last  proof  Trial  Balance  be  the  Balanee  Sheet, 
but  it  appears  that  the  student  is  proceeding  with  more  certainty  if  the  Balanee 
Sheet  is  prepared  first  and  the  Profit  and  Loss  Statement  proved  witli  it,  before 
beginning  the  process  of  closing.  (See  another  method  of  closing.  Problem  S. 
Paragraph  63.) 


11 


liOOKKKKIMXti  AND  ACCOUNTING 


PROBLEM  3.     TRADING   STATEMENT 

4:;  A  Trading  and  Profit  and  Loss  Statement  are  usally  combined  in  one 
statemenl  as  shown  in  Illustration  24.  If  desired  a  Trading  Statement  may  be 
prepared   separately.     The   followii  ement    is   prepared    from   the   same 

Trading  Accounts  as  in  the  Final  Trial  Balance,  Illustration  No.  21. 

Trading  Statement .  W  J.  Goodrow,  Decenber  31.  19 


Sales 

Lees  Returns  and  Allowances 
"  Sales  Dlsoount 

Dot  Sales 

Cost  of  Sales: 

Merchandise,  Invt.  Deo.  1 
Purohases 

Less  Returns  and  Allowances  $478.60 
"  Puichases  Discount      235.91 


$379.10 
66.51 


$15353.60 
714  51 


14726  15 
465  61 


14260  54 


Add  Freight  In 

Ket  cost  of  Merchandise 

Deduot  Mdse.  Invt.  Dec.  31 
Cost  of  Goods  sold 

Gross  Profit  in  Trading 
(46.21$  of  Sales) 


6972  50 

14639  29 
521  65 

24133  44 

16462    81 


7670   63 
6589~9T 


ILLUSTRATION    NO.    30.       TRADING    STATEMENT 

Note-  Bj  comparison,  the  student  will  observe  that  the  Trading  Statemenl  is  aim 
ilar  to  the  first  part  of  the  Profit  and  Loss  statement  (combined  Profit  and  Less  State- 
ment)  in  Illustration   No.  24. 

Problem  4.  From  the  following  data,  taken  from  the  Ledger  of  Morton 
Bros  on  December  31,  192—,  at  the  end  of  a  three  month  fiscal  period,  pre 
..are  a  Trading  Statement  similar  to  the  Foregoing  Total  Sales.  $15,002.60. 
Returns  from  Sales  and  Allowances  to  customers.  *Mh.!!.i.  Sales  })l--"1'1i"- 
$69.35.    Merchandise  Inventory,  Oct.  1,  $4,647.50.    Purchases.  *14.   -  te- 

tania from  Purchases  and  Allowances,  $379.24.     Purchases  Discount,  ^9.76. 
Freight  In  $513.96.     The  Merchandise  Inventory  December  31  is  $8,954.75. 


CHAPTER  III 
W.  J.  EMERSON,  SOLE  PROPRIETOR 

44.  The  books  to  be  used  are  Journal.  Ledger,  Notes  Receivable  and  Notes 
Payable  Book.  The  work  is  designed  for  the  business  papers  to  be  used,  which 
are  received  from  the  Incoming  Papers  Tab.  The  Cheek  Book,  Bank  Pass 
Book  and  the  stationery  for  the  outgoing  papers  are  used  also.  The  results 
will  be  the  same  whether  the  business  papers  are  used  or  not.  The  entries  to 
be  recorded  would  be  exactly  the  same  in  either  case. 

45.  Preliminary:  Write  your  name  on  the  outside  cover  of  the  books  to 
be  used.  Page  the  Journal  and  Ledger,  beginning  with  page  1.  If  the  busi- 
ness papers  are  to  be  used,  turn  to  "■Incoming  Papers  Tab"  and  receive  the 
papers  for  Transaction  No.  1,  prepare  the  opening  entry  in  the  Journal.  The 
references  la,  2a,  3a,  in  the  following  work  refer  to  similar  transactions  in  the 
preceding  set.  For  the  forms  of  Outgoing  Business  Papers,  the  keeping  of  the 
Bank  Account,  and  other  information  useful  in  the  work  of  this  set,  refer  to 
Paragraphs  63A  to  63M,  Pages  77  to  85. 

BUSINESS  TRANSACTIONS. 

No.  1.  Jan.  1.  W."  J.  Emerson  began  business  on  January  1,  192 — ,  with 
an  investment  represented  by  the  following  assets  and  liabilities : 
Cash,  $9,500:  Merchandise  Inventory,  $4,647.50;  and  a  10  day 
note  for  $975  at  6%,  dated  Jan.  1,  against  R.  II.  Payton. 

lie  owes  a  15  day  note  for  $675  at  6','  interest  dated  Jan.  1,  in 
favor  of  N.  M.  Brown  &  Co.  and  owes  See-Moon  &  Co..  Chicago,  111., 
$647.50  on  account. 

Each  asset  is  a  debit  and  each  liability  is  a  credit.  Credit  W.  J.  Emerson, 
Capital,  for  tlie  difference  between  the  assets  and  liabilities.  (See  la.)  Enter 
the  Notes  in  the  Notes  Receivable  and  Notes  Payable  Book. 

No.  2.  Jan.  2.  Bought  for  cash  of  the  Acme  Office  Supply  Co..  4  Desks  @ 
$45:  12  Chairs  @  $8.50;  1  Filing  Case.  $65;  4  Underwood  Type- 
writers @  $100;  1  Mimeograph,  $65.     (See  2a.) 

No.  3.  Jan.  2.  Bought  for  cash  of  Brown  Stationery  Co.,  Blank  Books, 
$37.50;  Office  Stationery,  $79.75.     (See  4a.) 

No.  4.  Jan.  2.  Bought  for  cash  of  the  Empire  Fixture  Co.,  9  Show  Cases  (a) 
$75;  12  Tables  @  $8.45;  12  Chairs  @  $7.25.  (Debit  Store  Fixtures 
account.     Itemize  when  posting  to  the  Ledger.     See  2a. 

No.  5.  Jan.  2.  Bought  for  cash  of  Dorris  Motor  Co.,  1  Two-ton  Truck,  $850; 
2  One-ton  Trucks  @  $350.     (See  3a.) 

No.     6.     Jan.  3.    Received  cash  for  sundry  cash  sales,  $485.70.     (See  8a.) 

No.     7.     Jan.  3.     Paid  Rush  Printing  Co.   for  printing  advertising  circulars, 

$127.50;  Form  Sales  Letters,  $28.75.     (See  10a.) 

No.  S.  Jan.  3.  Sold  to  D.  M.  Noe  &  Co..  Columbus.  O.,  2/15,  n/30,  35  brls. 
P.  B.  Flour  @  $8.75;  50  bx.  I).  Peaches  @  $4.25.  Sold  to  Davis  Bros., 
309  Park  Ave.,  City,  2/15.  n/30.  25  cs.  M  &  J  Coffee  U,  $8.75;  20  brls. 
G.  Flour  @  $9.25.    (Enter  separately.    See  7a 

45 


16  BOOKKEEPING  AND  ACl  OUNTING 

No.  9.  Jan.  4.  Purchased  of  R.  K.  Miller  &  Co.,  Cleveland,  0.,  merchandise 
as  per  Invoice  No.  I,  3/15  $750.25.    Purchased  of  See-Moon  & 

Co.,  Chicago,    111.,   merchandise   as   per    Invoice   No.   2,  3  15,   o  60, 

No.  10.  Jan.  5.  Received  a  check  for  $395.67  from  Davis  Bros.,  which  pays 
their  I > 1 1 1  of  January  3,  allowing  i"  ,  discount.  (29a.  Received  a 
1")  day  acceptance  i ;7  from  D.  M.  Noe  &  Co.,  dated  .Ian- 
nary  3,  and  allowed  -'.  discounl  on  bill  of  $518.75  of  January  3. 
(See   1  la.       (Enter  acceptance  in   Notes   Receivable  Book.) 

No.  11.     Jan.  5.     Received  cash  for  sundry  cash  sales  $514.25.    (8a.) 

No.  12.  Jan.5.  Sold  to  Dwight  Bros.,  Toledo,  0.,  2  15,  n  30, 125  cs.  R.  Sweet 
corn  u,  $3.83;  15  lirls.  <;.  Flour  <q  $8.75.  Sold  to  D.  M.  Noe  &  Co., 
2  15,  n  30,  85  cs.  Ideal  Tomatoes  (§  $3.25;  75  hx.  Evaporated  Apples 
@$4.35.     (7a. 

No.  13.  Jan.  5.  Purchased  of  Adas  Trading  Co.,  Detroit,  Mich.,  merchan 
disc  as  per  Invoice  No.  3,  '■'<  15,  n  60,  $747.50.  Purchased  of  Logan, 
Bryan  >x-  Co.,  Chicago,  III.,  merchandise  as  per  Invoice  No.  1.  3  15; 
n  60,  $635.40.     (6a. 

No.   14.      dan.  6.     Sold  Davis  Eros..  2  15,  n  30,  75  bx.  silver  Prunes  (2  $4.95, 

40  brls.  II.  Apples  (§  $5.15.    Sold  to  Smith  &  Jones,  Qtica,  N.  V..  2  1">. 

ii  30,  15  brls.  Karh  Potatoes  (g  $10.50;  W  cs.  Cantaloupe  („  $5.25. 
7a.) 

No.  15.      dan.  6.     Received  cash   for  sundry  cash   sales  $498.60.     (8a.) 

No.  16.  dan.  6.  Paid  office  help  for  the  week  $180.  Paid  payroll  of  sales 
force  for  the  week  $219.60.  Paid  drivers  of  delivery  trucks  for  the 
week  $45.    (17a.)    Total  payroll  check,  $444.60. 

No.  17.     dan.  ii.     Post  the  books  to  date,  and  ascertain  the  cash  balance.    Give 

Cash  account  a  full  page.  Give  Purchases,  Purchases  Discount.  Sales. 
sales  Discount,  Administrative  Expense,  Selling  Expense  and  Deliv- 
ery Expense  one-half  page  each.  Give  other  accounts  one-fourth  of 
a  page.      See  19a  and  I2a. 

No.  18.      dan.  8.     Gave   R.  K.   Miller  &   <  o.  a   15  daj    trade  acceptance   for 

$727. 71.  date, I  Januarj    1.  on  account,  and  r lived  •'!',    discount  on 

Invoice  No.  1.  (13a.)  Enter  all  notes  and  acceptances  in  the  Notes 
Receivable  and  Notes  Payable  Book. 

No.  19.  dan.  8.  Paid  W.  II.  Whitaker  $150  for  rent  of  store  building  for 
the  mont  h  of  Januarj .      See  15a.) 

No.  20.  dan.  8.  Paid  Sinclair  Oil  Co.  $38.75  for  Oil  and  Gasoline  for  delivery 
trucks.     (5a 

No.  21.  dan.  8.  Allowed  Davis  Bros.  $31  85  for  damaged  goods  on  bill  of 
January  ii.  Smitli  &  Jones  returned  10  cs.  Cantaloupes  (5  $5.25  from 
hill  of  January  6.     Enter  separately.     (See  12a. 

No.   '2'2.      dan.  S.      Received  an  allowance  of  $41.35  from  the  Atlas  T  radii 

for  shortage  on  Invoice  No.  3,  of  January  5.  Returned  goods  of  the 
value  of  $39.85,  to  Logan,  Bryan  i-  <  !o.,  from  Invoice  No.  I.  for  credit. 
(See  lla.) 


BOOKKEEPING  AND  ACCOUNTING  47 

No.  23.  Jan.  9.  W.  J.  Emerson  took  from  the  store  Eor  private  use,  2  brls. 
G.  Flour  @  $7.50;  10  bu.  W.  Potatoes  @  $3.75.     (9a.  i 

No.  24.  Jan.  9.  Paid  B.  &  0.  R.  R.  Co.  $219.86  for  freight  on  goods  pur- 
chased.   (See  22a.) 

No.  2">.      Jan.  9.     Received  cash  for  sundry  cash  sales  $421.50.     (Sa.) 

No.  2G.  Jan.  10.  Received  a  click  for  $976.63  from  R.  II.  Payton  lo  pay  his 
note  and  interest,  due  today. 

Debit  cash  $976.63.  Credit  Notes  Receivable  $975  (face  value)  because  the 
note  is  given  out.     Credit  Interest  and  Discount  for  the  interest,  $1.6.".. 

No.  27.  Jan.  10.  Borrowed  $5,000  of  the  Central  National  Bank  and  gave 
a  15  day  note  at  6%.     (Sec  23a.) 

No.  28.      Jan.  10.     Paid  See-Moon  &  Co.  $047.50  on  account.     No  discount. 

No.  29.  Jan.  11.  Paid  J.  B.  Owen  $42.85  for  repairing-  office  furniture. 
(Debit  Office  Equipment  Expense.) 

No.  30.  Jan.  11.  Bought  House  and  Lot,  508  Cherry  St.,  from  McGuire  & 
Orr  for  $7,500  subject  to  a  mortgage  of  $4,500.  3  years  from  January 
1  at  6%  interest.  Interest  accrued  to  date  is  $7.50.  which  they  agree 
to  pay.    Gave  check  for  the  equity  less  the  accrued  interest. 

Debit  Real  Estate,  House  and  Lot,  $7,500.  Credit  Mortgage  Payable  $4,500, 
because  we  assume  it.  Credit  Cash  $2,992.50.  Credit  Interest  and  Discount 
$7.50. 

No.  31.      Jan.  11.     Received  cash  for  sundry  cash  sales  $612.80.     (Sa.) 

No.  32.  Jan.  11.  Sold  1  Mimeograph  from  Office  Equipment  to  Jones  Bros, 
for  $40.  Original  cost  was  $65.  Loss  $25.  Received  a  check  for 
the  $40. 

Debit  Cash  $40.  Debit  Administrative  Expense  $25.  Credit  Office  Equip- 
ment $65,  the  original  cost.  When  property  that  was  charged  to  a  fixed  asset 
account  is  sold  or  exchanged  at  a  loss  or  entirely  lost  or  destroyed,  the  loss 
is  usually  charged  to  "Reserve  for  Depreciation,"  and  the  original  cost  is 
credited  "to  the  fixed  asset  account.  If  this  "Reserve"  account  is  not  set  up 
in  the  books,  then  debit  the  operating  account  affected.  In  this  case  it  is 
Administrative  Expense. 

No.  33.  Jan.  11.  Sold  to  Spencer  Bros.  1  Two-ton  Truck  for  $850,  the 
original  cost,  and  bought  a  Ford  One-ton  Truck  of  them  for  $350. 
Received  the  difference,  $500,  in  cash. 

Debit  Cash  $500.  Debit  Delivery  Equipment  $.150,  for  the  Truck  bought. 
Credit  Delivery  Equipment  $850  for  the  Truck  sold. 

No.  34.  Jan.  11.  Sold  to  A.  R.  Parsons  1  Show  Case  For  $60  cash.  Original 
cost  was  $75.     Loss  $15.     (See  No.  32.)     Received  check  for  $60. 

No.  35.  Jan.  12.  Paid  Watts  Decorating  Co.  $32.50  for  decorating  and 
repairs  on  House,  508  Cherry  St.  (Debit  Real  Estate  Expense  and 
Income.) 

No.  36.      Jan.  12.     W.  J.  Emerson  drew  $150  for  private  use.     (9a.) 

No.  37.  Jan.  13.  Paid  office  help  for  the  week  $180.  Paid  the  payroll  of 
sales  force  for  the  week  $219.60.  Paid  drivers  of  delivery  trucks 
$45.     (See  No.  16. 


48  BOOKKEEPING  AND  ACCOUNTING 

No.  38.     -Tan.  13.     Paid  Markham  [nsurance  Co.  $180  Eor  policy  on  stock  of 

a is.  to  cover  Erom  January  1.  for  one  year,  and  sen  For  policy  on 

House  and   Lot,  508  Cherry  St.,  to  cover  Erom  January    15  for  one 
year.      L8a. 

Mo.  39.  Jan.  13.  Purchased  of  Seaman  Grocer  Co.,  St.  Louis,  Mo.,  mer- 
chandise as  per  Invoice  No.  5,  :!  15,  n  60,  $1,847.50.  Purchased  of 
R.  K  Miller  &  Co.  merchandise  as  per  Invoice  Xu.  ii.  3  15,  n  60, 
$1,685.74.       6a. 

Post   the  luniks  to  date  and  ascertain   the  cash   balance.      (See 
19a  and  L2a  and  observe  these  suggestion 

No.  I".  Jan.  15.  Received  a  check  Eor  ^11.2.")  Erom  Rush  Printing  Co.  as 
a  refund  on  printing  advertising  matter,  bill  of  January  3.     (35a.) 

No    11       Jan    15.     Paid   Brown   Stationery  Co.  $123.45  for  office  stationery. 
La 

No.  4'_'.     Jan.   1~>.     Allowed   I).  M.  Noe  &  Co.  $49.85  Eor  damaged  g Is  on 

bill  of  January  •">.     (l'-'a.       Dwiirht   Bros,  returned  to  us  1">  es.  I.'. 
Sweel   Corn  (a    $3.75   Erom  bill  of  January  5,  Eor  credit.     (12a.) 

No.  43.  Jan.  16.  Received  $534.49  Erom  Davis  Bros,  which  pays  their  bal- 
ance of  $545.40  on  bill  of  January  6,  allowing  1%  discount.  Received 
617  10  Erom  smith  &  .lours  to  pay  balance  oi  $630  on  bill  of  January 
(i,  allowing  -"  .    discbunt.     (29a.) 

No.  44.  Jan.  in.  Gave  X.  M.  Brown  &  Co.  a  check  Eor  $676.69  to  pay  our 
15  day  note  of  $675  and  interest  a1  6%,  due  today.  Mark  paid  in 
.Notes  Payable  Book.)      (See   No.  26.) 

NO.  45,  Jan.  in.  W.  J.  Emerson  gave  Ids  personal  check  for  $2,000  as  an 
additional  investment.      (33a.) 

No.  4fi.  Jan.  17.  Received  $75  from  A.  L.  Hawkins  for  one  month's  renl 
on  House  and  lot.  .Mis  Cherry  St..  from  January  15  to  February  15. 
(Credit  Real  Estate  Expense  and  Income. j 

No.  47.  Jan.  17.  Sold  to  D.  M.  Noe  &  Co.,  2  15,  n  30,  150  doz.  O'Meal 
Crackers  (5  S4.7.~>;  245  bx.  I).  Peaches  (§  $4.25  Sold  to  Smith  & 
Jones  2  lo.  n  30,  75  brls.  Early  Potatoes  (§  $4.75;  60  brls.  G.  Flour 
{a  $8.75.  Sold  to  W.  II.  Mason  &  Sons,  l'  1."..  n  30,  75  es.  Butter 
Prints,  2750  lbs.  (.<■■    L3c;  LOO  es.  Condor  Coffee  (a  $7.50. 

No.  48.  Jan.  18.  W.  J.  Emerson  relurned  S'_'7.."i0  of  the  money  drawn  for 
private   use   on  January    L2. 

No.  4f>.  Jan.  IS.  Paid  Auto  Repair  Co.  .|-S7.o0  for  repairs  on  delivery  truck. 
Received  $13.75  from  Brown  Stationery  Co.  as  a  refund  on  their 
bill  of  January  15,  on  account  of  error.     (35a.) 

No.  50.  -Tan.  10.  Purchased  of  R.  T\.  Miller  &  Co.  merchandise  as  per 
Invoice  No.  7.  :i  r>,  n  60,  $1,538.70.  Purchased  of  See-Moon  iV  Co. 
merchandise  as  per  Invoice  No.  8,  3  15,  □  60,  $1,973.20.  Purchased 
of  Atlas  Trading  Co.  merchandise  as  per  Invoice  No.  0.  :!  15,  a  60, 
$1,496.85. 

No.  51.  Jan.  19.  Raid  C.  M.  &  St.  Raul  R.  R.  Co.  $312.85  for  freight  on  goods 
purchased.     (22a.) 

No.  52.      Jan.  1!'.     Received  allowance  of  s:;.,.74  from  TJ.  K.  Miller  &  Co.  for 

damaged  goods  on  [nvoice  No.  6.    Received  allowan* f  - 1  i  .50  from 

Seaman    (irocer   Co.    for   shortage    on    Invoice    No.   5    of   January    13. 

(11a.) 

No.  .A'!.      Jan.  10.      Allowed  W.  TT.  Mason   &   Sons  $32.50  for  damaged   g Is 

on  lull  of  January  17.     Received  $541.60  from  D.  M.  Noe  &  Co.  to 


BOOKKEEPING  AND  ACCOUNTING  49 

pay  their  balance  of  $552.65  on  bill  of  Jan.  5,  allowing  2' ,  dis- 
count.    (12a.) 

No.  54.  Jan.  19.  Received  a  30  day  note  of  $1,750  a1  6' ,  from  l>.  M.  Noe 
&  Co.  on  account.  Received  a  30  day  note  id'  $1,900  at  tl',  Prom  \V. 
11.  Mason  &  Sons,  on  account.  (Enter  in  Notes  Receivable  Book. 
See  24a.) 

No.  55.  Jan.  10.  Gave  R.  K.  Miller  &  Co.  a  30  day  note  for  +1.650  at  6%  on 
account.  Gave  Seaman  Grocer  Co.  a  30  day  note  for  +1,800  al  0',, 
on  account.      (Enter  in  Notes   Payable   Hook.     See  24a.; 

No.  56.  Jan.  20.  Received  +790.92  from  Dwight  Bros,  to  pay  their  bal- 
ance of  $816.25  on  bill  of  Jan.  5,  allowing  2%  discount.     (29a.) 

No.  57.  Jan.  20.  Paid  See-Moon  &  Co.  $911.65  which  pays  Invoice  of  Jan. 
4  in  full,  deducting  3\  discount.  Paid  Atlas  Trading  Co.  $684.97, 
which  pays  balance  of  Invoice  of  Jan.  5,  $706.15,  deducting  :;■,  dis- 
count. Paid  Logan.  Bryan  &  Co.  $577.68,  which  pays  balance  of 
Invoice  of  Jan.  5,  $595.55,  deducting  :i',    discount.     (28a.) 

No.  58.  Jan.  20.  Paid  office  help  for  the  week  $1S0.  Paid  the  payroll  of 
sales  force  $219.60.    Paid  drivers  of  delivery  trucks  $45. 

Xo.  59.  Jan.  20.  Received  check  for  $508.37  from  D.  M.  Noe  &  Co.  to  pay 
their  15  day  acceptance  due  today.  (Mark  paid  in  Notes  Receivable 
Book.    See  31a.) 

Post  the  books  to  date,  and  ascertain  the  cash  balance.  (See  19a 
and  42a.) 

Jan.  22.  -Received  $18.75  from  C.  M.  &  S.  Paul  R.  R.  Co.,  rebate 
for  overweight  on  freight  bills  of  Jan.  19.  (Credit  Freight  In.) 
Received  $8.75  refund  from  Auto  Repair  Co.  on  bill  of  Jan.  IS. 
(Credit  Delivery  Expense.)     See  35a  and  37a. 

Jan.  22.  W.  J.  Emerson  withdrew  $1,000  from  bis  investment  in 
the  business.     (See  paragraph  8.) 

Jan.  23.  Paid  J.  II.  Andrews  $54.35  for  resetting  Store  Fixtures. 
(Debit  Store  Fixtures  Expense.) 

Jan.  23.  Purchased  of  Logan.  Bryan  &  Co.,  merchandise  as  per 
Invoice  No.  10.  3  15,  n  60.  $1,272.35.  Purchased  of  Seaman  Grocer 
Co.,  merchandise  as  per  Invoice  No.  11,  3  15,  n/60,  $1,198.75. 

Jan.  23.  Paid  R,  K.  Miller  &  Co.  $727.74.  for  our  15  day  acceptance, 
due  today.     (31a.) 

Jan.  24.  Sold  to  D.  M.  Noe  &  Co.,  2  '15.  n  3,0.  100  cs.  Glucose  Syrup 
@  4.1.):  125  bx.  Silver  Prunes  @  $4.25.  Sold  to  Davis  Bros.,  2  15, 
n/30.  150  cs.  Ideal  Tomatoes  @  $3.75;  100  brls.  Sweet  Potatoes  @ 
$5.25.  Sold  to  Dwight  Bros.,  2  15,  n  30,  100  brls.  II.  Apples  (§ 
$5.75;  50  brls.  G.  Flour  (a)  $7.35.  Sold  to  \Y.  II.  Mason  &  Sons,  2  15, 
n/30,  100  cs.  12  lb.  Chocolate  (§  $5. till;  75  cs.  M.  &  J.  Coffee  @  $8.75. 

Jan.  25.  Paid  our  15  day  note  of  $5,000  at  Central  National  Bank 
by  giving  a  new  note  for  $3,500  for  30  days  at  tl',  .  and  a  check  for 
$1,517.50,  which  includes  the  interest   on  the  new  note.     (47a.) 

Note:     The  usual  procedure  at  the  bank  is  that  you  wouiii  give  the  bank 

a  check   foi   $5,000   for   tl 1.1   note   and   the   bank   cancels   the  el. I    ie.tr   and 

returns  it  to  you.  You  give  the  bank  the  new  note  of  $3,500  and  tin'  bank 
enters  $3,482.50  ($3,500  less  $17. eft  interest  collected  in  advance)  in  your  pass 
book.  In  this  case,  however,  you  have  included  tic  $17.50  in  your  check,  and 
the  bank  enters  $3,500  in  your  pass  book. 


50  BOOKKEEPING   AND  ACCOUNTING 

No.  68.  Jan.  26.  Sold  House  and  Lot,  508Cherry  St.,  to  A.  L.  Hawkins,  the 
present  occupant,  for  $8,000.  Received  his  check  for  $3;500,  and  lie 
assumes  the  mortgage  of  $4,500  with  interesl  from  its  date.  We  are 
to  retain  all  rents  collected  prior  to  this  date. 

Debit  ea  1>  $3,5 Debit  Mortgage  Payal  ■  ■■  an   relieved 

of   ill'-   obligation.     Credit    Beat    Estate,    Bouse   and    Lot,   $8,000.     We   would 

simply   make   liim   ;i    .1 1    i..   the    property   Bubject    to   tin-    innrtL: 

trust   "i   $4,£ ll«'  would  record   In-  deed  :it   the  Eecorder's  office.     As  this 

old,  it  is  no  longer  an  asset,  but   will  appear  in  the  Profit   and 
i  o      Statement   as  "Other   Income." 

No.  69.  -Ian.  27.  Canceled  the  insurance  policy  od  tin-  house,  508  Cherry 
St..  and  received   -  ->  for  the  returned  pari  of  the  premium. 

Debit  Cash  $35.     T >.■  t .i  1    Real   Estate  Expense  and  Income  $25  t'"i    the 
on  the  insurance  ($60  less  $35).    Credit  Insurance  $60,  for  the  canceled  policy. 

No,  70.  -Ian.  27.  Paid  office  help  I'm-  tin-  week  $180;  Paid  payroll  of  sales 
force  tin'  tin'  week  $219.60.     Paid  drivers  of  delivery  trucks  I'm'  the 

Week    $45. 

No.  71.  Jan.  28.  T).  M.  Noe  &  Co.  returned  to  us  12  brls.  Silver  Prunes  @ 
$4.25,  from  lull  of  .Ian.  24,  for  credit.     Gave   Davis  Bros,  a  credit 

memorandum  I'm-  $48.25  lor  damaged  l; Is  on  loll  of  .Ian.  21.    Gave 

\Y.  II.  Mason  &  Sims  a  credit  memorandum  for  $38.75  tor  shortage 
on  bill  of  Jan.  24.     (See  12a. 

No.  72.      Jan.   29.     Received    a    credit    memorandum    For   $127.35   from   See- 

.Moon  &  ('<>.  for  damaged  ■_: Is  on  Invoice  No.  8,  Jan.  19.     Returned 

■_ Is  of  the  value  of  $87.45  to  R.  K.  Miller  &  Co.  from  Invoice  No. 

7,  Jan.  11).  for  credit.      (]  la. 

No.  73.  Jan.  :10.  Paid  W.  P.  Dunn  Printing  Co.  $187.50  for  printing  adver- 
tising matter.     (10a. 

No.  71.      Tost   the  hooks  to  dale,  and    prepare  a  Trial    Balance.      (See  57a. 
Eaving  the  Trial  Balance,  the  student  is  required   to  prepare  and 

post    journal   entries  to  provide   for  the   following  inventories.      (See 
paragraphs  27  and  28.) 

Merchandise  Inventory.  Jan.  31 +8.954.7."' 

Insurance    Expired    15.00 

Accrued  Liabilities : 

Interest    Accrued  on    Notes   Receivable 7.30 

Interest   paid   in  advance  on   loan 14.00 

Accrued  Liabilities: 

Unpaid  office  help  half  of  week 90.00 

Unpaid  payroll  of  sales  force,  half-week 109.80 

Unpaid    delivery   drivers,    half-week 22.50 

Interest     Accrued    on    Notes    Payable 6.90 

Deferred  Charges  to  Operation: 

Office  stationery  on  hand 72.50 

Advertising   matter  on   hand ~\"<>  \>< 

Depreciation : 

In',    mi  Office  Equipmenl   74.70 

i'1'      on  Store   Fixtures   7-M 

in-,    on  Delivery  Equipment 105.00 

Reserve  for  DnuMful  Accounts: 

•'■',    of  debil  balance  of  Accounts  Receivable....      246.98 


BOOKKEEPING  AND  ACCOUNTING  51 

No.  75.  After  posting  the  journal  entries  to  record  the  above,  prepare  a 
Final  Trial  Balance  before  closing  the  books,  from  which  prepare  a 
Balance  Sheet,  and  a  Profit  and  Loss  Statement.  (See  paragraphs 
28  to  34,  and  illustrations.) 

Close  the  books,  following  instructions  in  paragraphs  35  to  41. 
closing  W.  J.  Emerson,  Personal,  Cash  account,  and  W.  J.  Emerson 
Capital,  in  the  same  manner  as  there  explained  for  W.  J.  Goodnow. 

All  the  nominal  accounts  are  closed,  and  the  Ledger  accounts 
are  ready  to  receive  the  business  for  the  next  period,  that  of  W.  J. 
Emerson  &  Co..  a  partnership,  which  will  be  a  continuation  of  this 
business,  using  these  same  accounts,  after  the  student  lias  learned 
to  keep  other  books  of  original  entry :  Cash  Book,  Sales  Book,  and 
the  Purchases  Book,  illustrated  in  the  following  set,  which  will  be 
written  up  on  journal  and  ledger  paper. 


PROBLEM  5.  DETAILED  STATEMENTS  AND  SCHEDULES 

Prepare  a  detailed  statement  to  reconcile  the  amount  of  the  Administrative 
Expense  and  the  amount  of  the  Selling  Expense  in  the  business  of  W.  J. 
Emerson. 

Prepare  a  schedule  reconciling  Accounts  Receivable  for  the  amount  shown 
in  the  Balance  Sheet  of  W.  J.  Emerson,  giving  the  due  date  of  the  amounts 
that  each  customer  owes.  Prepare  a  schedule  reconciling  Accounts  Payable. 
giving  the  due  date  of  the  amounts  owing  to  creditors.  See  paragraphs  33 
and  34. 


PROBLEM  6.  WORKING  SHEET,  BALANCE  SHEET,  PROFIT  AND  LOSS  STATEMENT 

In  a  hardware,  clothing,  department  store  or  a  general  store,  and  many 
other  lines  of  business,  it  is  not  practical  to  take  an  inventory  of  merchandise 
each  month,  because  it  requires  much  time  and  labor,  and  retards  business  for 
the  time.  Such  lines  of  business  take  an  inventory  at  the  end  of  six  months 
or  a  year,  usually  at  the  end  of  a  year.  Then  the  year  is  their  fiscal  period, 
and  their  books  are  closed  only  once  a  year.  In  such  cases,  the  bookkeeper 
should  keep  the  books  posted  up  to  date,  daily,  and  take  a  Trial  Balance 
at  the  end  of  each  month.  The  books  cannot  be  closed  until  an  inventory  is 
taken,  but  the  bookkeeper  can  submit  a  detailed  statement  of  Administrative 
P^xpense  and  Selling  Expense,  and  schedule  the  Accounts  Receivable  and 
Accounts  Payable,  giving  the  management  a  line  on  the  expenses  and  on  col- 
lections and  on  Avhat  is  soon  to  be  paid. 

In  a  business  where  the  inventory  can  be  taken  each  month,  a  Balance 
Sheet  and  Profit  and  Loss  Statement,  and  any  necessary  detailed  statements 
or  analysis  sheet  of  expenses  and  schedules  of  Accounts  Receivable,  Notes 
Receivable.  Notes  Payable,  and  Accounts  Payable  can  be  prepared  each  month, 
even  though  the  books- are  not  to  be  closed  until  the  end  of  the  fiscal  period. 
and  the  Nominal  Accounts  all  left  open  to  run  until  the  end  of  the  period. 
These  reports  give  the  management  up-to-date  information  of  the  condition 
and  progress  of  the  business. 

The  following  Working  Sheet  will  expedite  the  preparing  of  these  state- 
incuts,  whether  the  books  are  to  be  closed  or  not.  because  from  this  Working 
Sheet,  the  Balance  Sheet  and  Profit  and  Loss  Statemenl  can  lie  prepared  and 


52 


I'.OOKKHKIMXC   AND  ACCOUNTING 


submitted  quickly,  and  if  the  books  are  to  be  closed  this  work  can  be  done 
afterwards. 

The  first  two  columns  in  the  following  Working  Sheel  arc  the  Trial  Bal- 
ance taken  from  the  books  of  C.  W.  Perkins  on   December  31,   192     .     The 

second  two  columns  contain  the  adjustments  necessary  to  r< rd  the  inventories 

or  supplementary  facts  in  the  bonks.  The  last  two  columns  are  the  final  Trial 
Balance  from  which  the  Balance  Sheet  ami  Profil  anil  Loss  Statement  arc 
prepared.  The  Profil  an. I  Loss  Statemenl  is  shown  here  in  this  partial  solu- 
tion in  oi-,ler  to  call  the  student's  attention  to  "Other  Income"  ami  "Deduc- 
tions from  Income,"  bul  the  student  is  required  to  prepare  the  Balance  Sheet 
and  prove  it  with  this  Profit  ami  Loss  Statement,  ami  to  prepare  the  adjust- 
ment journal  entries. 


Barking  Sheet,  C.  '*.  Perkins,  Lece-.ber  .'1.  132 


Trial  Balance 


AaJ-iatne  r.ts 


Final  Trial 
Balance 


C.  W.  Perkir.s.  Capital  .... 

C.  W.  Ferklnj,  Personal.  .  .  .  II   375  00 

Cash 10215  25 

.  .  .   3650  00 

.  .  .    5765  54 


Kotes  Reoeivable 

Aoeounts  Receivable   .  .  . 

Insurance   

flotes  Payable 

Aooounts  Payable  

Real  Estate,  House  and  Lot 

Office  Equipment  

Store  Fixtures    

Delivery  Equipment  .... 
Kerohandlse  Inventor,,   .  . 

Purchases    

Purchases  Discount  .... 

Freight  in  

Sales   

Sales  Discount 


180 


747 

7ee 

1050 
5647 


00 


15000  00 


7950  00 


U 


6275 
650 


379 


05 

00 


:  i 


00 


69  35 


1110  90 
262  50 


32 


56 


Administrative  Expense  ,  .  .  .    1236  95 

Selling  Expense   

Delivery  Expense  

Office  Equipment  Expense,.  .  . 
Store  Fixtures  Expense  .... 
Real  Fstate  Expense  and  Inoo-e 
Interest  and  Discount  .... 
Loss  on  Doubtful  Acoounts  .  . 

Aoorued  Assets    

Accrued  Liabilities   

Deferred  Charges  to  Operation 
Res. for  Dep.on  Office  Equipment 
Res. for  Dep.on  store  Fixtures 
Res. for  Dep.on  Delivery  Eqnip. 
Rea.for  Doubtful  Accounts   .  . 


15102 

60 

• 

219 

22 

17 

50 

6 

246 
20 

198 


72  50 
BO  126  40 
50 


90   20  72 

98 

72 

254  20 
90 

74  70 

76  84 

105  00 

a4o  98 


375  00 

10215  25 

3650  00 

5765  54 

165  00 


747  00 
788  40 

lo?"  oo 

564  7  50 
13085  09 


663  96 

460  95 

69  35 

1422  99 

1204  30 


15000 


7950 

6275 

650 


379 
89 


15100 


57 
44 

ie 

246 
20 


BE 
35 

74 
96 

7. 


17 


234 


198  90 


00 


00 
05 

oo 


24 
76 


50 


5C 


20 


4b46  i  15   l:  164  15   974 


u= 


74 

105  00 

Fi6  qft 


34       'J74    34         46203    87       46203   87 

:,  ;       ,i  I 


ILLUSTRATION   NO    31.     WORKINV.  SHEET 


Inventories:  Merchandise  Inventory.  Dec  31,  $8,954.75,  Insurance  expired, 
$15.  Accrued  Assets:  Interest  accrued  on  Notes  Receivable  $7.30,  Interest 
paid  in  advance  for  hank  loan.  $13.42.  Accrued  Liabilities:  Unpaid  office 
help,  $90,  unpaid  sales  force,  $114.80,  unpaid  delivery  drivers.  $22.50.  Interest 
accrued  on  Notes  Payable,  $6.90.  Deferred  Charges  to  Operation:  Office 
stationery  on  hand,  $72.50,  advertising  matter  on  hand,  $126.40.  I  depreciation  : 
Office  Equipment,  $74.70,  Store  Fixtures,  $78.84,  Delivery  Equipment,  $105. 
Reserve  for  Doubtful  Accounts    had  debts  .  $246.98 

These  items  are  incorporated  in  the  Working  SI t,  and  the  journal  entries 

to  record  the  above  items  in  the  honks  can  be  prepared  Er the  working  sheet 

or  from   the   above   items,  as   in   chapter   II.     The   fiscal   period    is   one   month, 

Deeelllher     1      to     Dceemher    31 


BOOKKEEPING  AND  ACCOUNTING 


53 


Adjustment  Entries 
$15.00 


Administrative   Expense 

Insurance    $15.00 

Accrued   Assets  $20.72 

Interest    and    Discount    .  . .  $20.72 

Administrative   Expense    ...   $90.00 

Selling  Expense    114.80 

Delivery  Expense   22.50 

Interest    and    Discount    6.90 

Accrued    Liabilities     $234.20 

Deferred    Charges    to   Opera- 
tion     $198.90 

Administrative  Expense   . .  $72.50 

Selling    Expense    120.40 

When  these  journal  entries  are  posted  to  the  Ledger  accounts,  the  Ledger 
accounts  will  then  appear  as  shown  in  the  Pinal  Trial  Balance  of  the  Working 
Sheet.  Prepare  a  Balance  Sheet  from  the  Final  Trial  Balance,  and  prove  it 
with  the  following  Profit  and  Loss  Statement. 


Administrative    Expense     ...$153.54 

Selling  Expense 105.00 

Res.    for    Dep.    on    Office 

Equip $74.70 

Res.     for    Dep.    on    Store 

Fixtures    78.84 

Res.  for  Dep.   on  Delivery 

Equip 105.011 

Loss  on   Doubtful  Accts $246.98 

Res.   for   Doubtful   Accts..  $246.98 


Profit  and  Lobb  Statement  c.  ff.  Perkins.  December  31,  192 


Sales: 

Less  Returns  and  Allowances 
"   Sales  Discount 

Net  Sales 


$460.95 
69  35 


Cost  of  Sales. 

Merchandise  Inventory,  Dec 
Purchases 


Less  Returns  and  Allowances  $379.24 


513086  09 


89.76    469.00 


Purohases  Dlsoount 
Add  Freight  In 

Cost  of  Merchandise 

Eeduot  Merchandise  Invt.Dec.31 
Cost  of  Coods  Sold 

Gross  Profit  on  Sales 
(31.55$  of  Sales) 

Operating  Expenses 

Administrative  Expense 

(9.76^  of  Sales) 
Selling  Expense 

(8.26$  of  Sales) 
Delivery  Expense 
Offioe  Equipment  Expense 
Store  Fixtures  Expense 

Total  Cost  of  Operations  (20.82$  of  Sales) 
Wet  Business  Profit 

Other  Inoome 

Real  Estate.  House  and  Lot  (Froflt) 
Real  Estate  Expense  and  Income 


15102 
550 


Deductions  from  Income; 

Interest  and  Discount 
Loss  on  Bad  Debts 

Net  Profit  (13.48"  of  Sales) 

ILLUSTRATION    NO.    32.      PROFH    AND    LOSS    STATEMENT 


5647 


12617 

663 


50 


16928  55 
6954  75 


1422 

1204 

305 
57 

44 


9  'J 

30 

00 
B5 

35 


650  00 
I?  50 


14572 


18  74 

P46  98 


.50 


9973  80 


4598  50 


3034 


1564 


667 


2231 


HuS 


1965 


49 


01 


Bfl 


51 


72 


79 


54  BOOKKEEPING  AND  ACCOUNTING 

A  Working  Sheel  maj  have  two  columns  following  the  two  columns  for 
Adjustments,  for  Profil  and  Loss  or  Gains  and  Losses  to  which  the  gains  and 
losses  mar  be  transferred  so  thai  these  two  columns  would  conform  to  the 
Profit  and  Loss  account  and  the  Profil  and  Loss  Statement,  and  from  which 
some  accountants  prepare  the  closing  journal  entries.  The  Working  Sheet 
shown  is  more  simple,  if  a  Working  Sheet  is  to  be  used.  A  Working  sheet  of 
this  kind  will  expedite  the  work  in  examinations. 

A  Working  Sheel  is  most  useful  in  auditing,  in  which  case  ten  columns  are 
used:  Trial  Balance  debil  and  credit,  Adjustments  debil  ami  credit.  Deprecia- 
tions and  Inventories  debit  and  credit,  Losses  and  Cains  debit  and  eredit,  and 
Balance  Sheet  or  Assets.  Liabilities  and  I  lapital  debit  and  credit.  As  the  bunks 
are  audited,  the  necessary  adjustments  for  omissions,  transfers  required,  cor 
rections,  etc.,  arc  entered  in  Hie  Working  sheet,  and  when  the  audit  is  com- 
pleted, journal  entries  are  prepared  t<>  record  these  adjustments  of  whatever 
kind  in  the  books.  The  principle  and  form  is  the  same  as  the  Working  Sheet 
illustrated  It  is  not  necessary  to  show  this  ten  column  Working  Sheet  here, 
as  a  method  of  procedure  in  auditing  is  not  being  taken  up.  yet  this  explana- 
tion will  convey  the  idea  to  any  one  who  understands  the  accounting  that  is 
shown  in  this  work. 


CHAPTER  IV 
D.  L.  MORRISON  &  CO.     A  PARTNERSHIP 

Illustrating  the  Books  of  Original  Entry 

46.  The  purpose  of  this  set  is  to  illustrate  the  Cash  Book,  Purchases  Book, 
and  Sales  Book,  and  to  show  the  posting  from  these  books  to  the  Ledger 
accounts.  The  set  is  not  completely  worked  out,  but  enough  of  the  work  is 
shown  so  that  the  student  can  complete  it,  by  following  instructions.  Rule 
special  columns  where  necessary,  to  conform  to  the  forms  shown  here.  The 
business  papers  are  not  used  in  this  set.  The  accounting  at  the  end.  Balance 
Sheet,  Profit  and  Loss  Statement,  adjustment  entries  for  the  inventories  and 
the  closing  is  left  for  the  student.  It  is,  therefore,  necessary  for  the  student 
to  work  out  the  set  from  the  beginning. 

47.  The  books  of  original  entry  are  Cash  Book,  Purchases  Book,  Sales 
Book  and  Journal,  as  used  and  shown  here.  Any  book  in  which  transactions 
are  first  recorded,  as  the  intermediate  step  preparatory  to  posting,  is  a  book 
of  original  entry. 

48.  Cash  Book:  No  Cash  account  is  kept  in  the  Ledger.  The  Cash  Book 
is  the  Cash  account.  The  Cash  Book  has  two  sides,  just  as  the  Cash  account 
has  two  sides,  but  the  Cash  Book  requires  two  pages  opposite  each  other.  The 
left-hand  page  is  the  ''debit  side"  and  the  right-hand  page  is  the  "credit 
side."  All  cash  received  is  entered  on  the  left-hand  page  or  "debit  side,"' 
and  all  cash  paid  out  is  entered  on  the  right-hand  page  or  "credit  side." 
Cash  is  debited  when  the  entry  is  made  on  the  left-hand  page  and  the  other 
account  is  credited.  Cash  is  credited  when  the  entry  is  made  on  the  right- 
hand  page  and  the  other  account  is  debited. 

49.  Purchases  Book:  All  purchases  of  merchandise  on  account  are  entered 
in  the  Purchases  Book.  Nothing  but  purchases  of  merchandise  is  entered 
in  this  book.  When  merchandise  is  purchased,  "Purchases"  is  debited  and 
the  name  of  the  person  or  firm  from  whom  purchased  is  credited.  So  the  names 
of  persons  or  firms  in  the  Purchases  Book  are  all  creditors,  and  the  amounts 
are  posted  to  the  credit  of  their  accounts  from  this  book.  At  the  end  of  the 
month,  the  total  of  all  purchases  is  posted  in  one  amount  to  the  debit  of 
"Purchases"  account. 

50.  Sales  Book:  All  sales  of  merchandise  on  account  are  entered  in  the 
Sales  Book.  The  names  of  persons  or  firms  in  the  Sales  Book  are  customers. 
The  amounts  in  this  book  are  posted  to  the  debit  of  these  customers'  accounts. 
At  the  end  of  the  month,  the  total  of  all  sales  is  posted  in  one  amount  to  the 
credit  of  "Sales"  account. 

51.  Journal:  All  transactions  that  do  uo1  belong  in  the  Sales  Book.  Pur- 
chases Book,  or  Cash  Book,  are  entered  in  the  Journal.  The  (ash  Book  take- 
all  cash  transactions  out  of  the  Journal.  The  Purchases  Book  eliminates  all 
purchases  from  the  Journal.  The  Sales  Book  eliminates  all  sales  of  merchan- 
dise from  the  Journal.  The  student  will  soon  observe  thai  this  shortens  the 
Journal  and  saves  much  work  in  posting,  as  well  as  to  give  better  information 
of  the  different  departments  of  the  business. 

55 


5(i  BOOKKEEPING  AND  ACCOUNTING 

•">:!.  Special  Columns:  If  ii  is  found  thai  any  item  such  as  expense,  flis- 
count,  etc.,  occurs  frequently,  a  special  column  in  the  Cash  Book  will  saw 
much  work  in  posting,  for  then  the  total  of  the  special  column  is  posted  in 
<uic  amount,  at  the  end  of  the  month,  instead  of  posting  tin-  item  each  time 
it   occurs.     Sec  the  special  columns  in  the  illustration  of  the  Cash  Hook. 

When  special  columns  are  kepi  in  the  Cash  Book,  each  item  that  goes  in 
a  special  column  is  checked  to  show  that  it  is  not  to  he  posted,  and  at  the 
end  of  tie-  month  the  total  of  each  special  column  is  posted  to  the  account 
it  represents,  in  posting  the  Cash  Book,  only  the  items  in  the  "General" 
column  arc  posted,  and  the  totals  of  the  special  columns  are  posted  at  the 
end    of    the    month. 

53.  Using  the  Cash  Book  eliminates  all  cash  transactions  from  the  Journal. 

The  purpose  is  to  shorten  the  work  and  show  a  better  tverd  of  cash.  The 
principle  of  the  journal  entry  is  the  same  whether  entered  in  the  Journal  or 
the  Cash  I'.ook.  The  Cash  I'.ook  entr)  shows  the  debil  and  credit  the  same 
;is  the  jour  i;d  entry  hut  in  a  different  form.  Notice  what  the  journal  entry 
would  he  in  v\^'i-y  Cash  I'.ook  entry,  and  it  will  lie  eas_\  to  understand  the 
<  ash    I'.ook. 

54.  Using  the  Purchases  I'.ook  eliminates  all  purchases  from  the  Journal, 

and  shortens  the  work.  View  the  whole  Purchases  Hook  as  one  journal  entry 
with  one  debit  (the  total  of  all  purchases  .  and  the  name  of  each  person  or 
firm  as  the  credits,  and  it  will  he  easj  to  understand  this  book.  Viewed  in 
this  manner,  it  is  really  a  Journal. 

55.  dsing  the  Sales  Hook  eliminates  all  sales  transactions  from  the  Journal, 
and  shortens  the  work.     View  the  whole  Sales  I'.ook  as  one  journal  entry  with 

one  credit  (the  total  of  all  sales),  and  the  nan f  each  person  or  firm  as  the 

debits,  and  you  will  understand  the  theory  of  this  hook.  Viewed  in  this  man- 
ner, it  is  really  a  Sales  Journal. 

56.  View  the  debit  page  of  the  Cash  I'.ook  as  one  journal  entry  with  the 
total  cash  received  as  one  debit,  and  the  items  in  the  General  column  and  the. 
totals  of  the  special  columns  (excepl  Sales  Discount)  as  the  credits,  and  you 
will  understand  the  theory  of  the  left  side  of  tin-  (ash  Book,  as  well  as  the 
theorj    of  each  entry. 

57.  View  the  credil  page  of  the  Cash  P>ook  as  one  journal  entry  with  the 

total  of  cash  paid  out  as  th ic  credit,  and  the  items  in  the  General  column 

ami  the  totals  of  the  special  columns  as  the  debits,  and  jiou  will  understand 
the  theorj  of  tlie  righl  hand  page  of  the  Cash  I'.ook.    This  is  the  way  to  think 

of  these  1 ks  when  posting  them,  and  when  making  an  entrj   in  an\  of  them. 

Whenever  any  Cash    I'.ook   entry  is  not   clear  to  you,  make  a   journal   entry   of 
tile  transaction  on  scratch   paper  and   post   to  T  Ledger  accounts  and   see  that 
the  result   of  your  Cash   I'.ook  entry  amounts  to  the  same  thing.     Sec  illustra 
tion  under  9b,  May  .">.   follow  ing. 

58.  Use  one  sheet  of  journal  paper  for  the  Purchases  Book,  ruling  a  col- 
umn   lor    the    ledger    page    (L.F.).      I 's e    sheet    of   journal    paper    for    the 

Sales  Book,  one  sheet  for  the  Journal,  and  one  sheet  for  the  Cash  Hook. 
ruling  one  extra  column,  ami  a  column  for  the  ledger  page,  ami  head  tile  col- 
umns to  conform  to  the  following  Cash   I'.ook  illustration. 

i9  As  tile  student  is  familiar  with  the  Journal,  only  the  opening  entry  and 
a  \'r\v  journal  entries  are  shown  in  the  illustration  of  this  book.  The  studenl 
can  easily  prepare  the  remaining  journal  entries  with  the  references  and 
explanations  given.  The  references  la,  5a,  12a,  etc..  refer  to  a  similar  trans 
action  in  Chapter  II.  ami  2b,  5b,  etc..  refer  to  a  similar  transaction  in  this  s,  t 


BOOKKEEPING  AND  ACCOUNTING 


57 


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ILLUSTRATION'  NO.  33.   PURCHASES  BOOK 

60.  To  Post  the  Purchase  Book:  Post  each  amount  to  the  credit  of  the 
account  (person  or  firm)  written  on  the  same  line  with  it  and  write  the  terms, 
3/15,  n  90,  or  whatever  the  terms  may  be,  in  the  explanation  column  in  the 
Ledger  account,  for  convenience  in  watching  the  discounts  and  the  due  date 
of  invoices.  The  total  Purchases  is  posted  at  the  end  of  each  month  only.  At 
the  end  of  the  month,  the  total  of  all  purchases  is  posted  to  the  debit  side  of 
Purchases  account. 

61.  To  Post  the  Debit  Side  of  the  Cash  Book:  Post  each  item  in  the  "Gen- 
eral'' column  to  the  credit  side  of  the  account  written  on  the  same  line  with 
it.  In  the  ease  of  a  payment  received  from  a  customer  where  a  discount  is 
allowed,  post  the  item  in  the  General  column  to  the  debit  side  of  the  customer's 
account  and  on  the  next  line  on  the  same  date  post  the  discount,  as  in  the 
fourth  entry  of  the  illustration.  Trace  this  in  the  illustration  of  the  Ledger 
account  of  A.  R.  Parsons  &  Co.  The  items  in  the  "Sales"  column  are  checked 
to  show  they  are  not  to  be  posted.  The  total  of  this  "Sales"  column  is  posted 
to  the  credit  of  "Sales"  account  at  the  end  of  the  month.  One  posting  instead 
of  many.  The  items  in  the  special  column  should  be  checked  at  the  time 
i  he  entry  is  made. 


62.  To  Post  the  Credit  Side  of  the  Cash  Book:  Post  each  item  in  the 
"General''  column  to  the  debit  side  of  the  account  written  on  the  same  line 
with  it.  The  items  in  the  special  columns  are  checked,  and  are  not  posted. 
At  the  end  of  the  month  the  total  of  Administrative  Expense  column  is  posted 
to  the  de"bit  of  Administrative  Expense  account,  and  the  total  of  Selling 
Expense  column  is  posted  to  the  debit  of  Selling  Expense  accounl  in  the 
Ledger.     The  purpose  of  special  columns  is  to  save  posting. 


58 


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BOOKKEEPING  AND  ACCOUNTING 


59 


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ILLUSTRATION   NO.   35.     CREDIT  SIDE  OF  CASH    HOOK 


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ILLUSTRATION    NO.    3fl.       SALES    BOOK 


63.  To  Post  the  Sales  Book:  Post  the  total  amount  of  each  sale  in  the 
second  money  column  to  the  debit  of  the  customer's  account,  and  write  the 
terms,  2/10,  n/30,  or  2/15,  n  60,  in  the  explanation  column  of  the  Ledger 
account  for  convenience  in  watching  the  discounts  and  the  due  date  of  bills. 
The  total  of  sales  is  not  posted  until  the  end  of  the  month.  At  the  end  of  the 
month,  the  total  of  all  sales  is  posted  to  the  credit  of  "Sales"  account. 


BOOKKKKPING   AND   ACCOUNTING 


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tLLUSTRATION  NO.  37.     JOURNAL 


Note:  The  first  two  journal  entries  above  arc  the  Opening  Entry!  Only  a 
few  other  journal  entries  are  shown,  because  the  student  is  already  familiar  with 
the  Journal  and  can  easily  prepare  the  journal  entries  for  this  set.  All  trans- 
actions thai  <1<>  qoI  belong  in  the  Cash  Book,  Purchase  Booh  or  Sales  Hook  are 
entered  in  the  Journal. 


BOOKKEEPING  AND  ACCOUNTING  63 

BUSINESS  TRANSACTIONS 

lb.  May  1.  D.  L.  Morrison  and  II.  L.  Brown  have  formed  a  partnership 
according  to  articles  of  copartnership  signed  and  executed  this  day.  The 
partners  are  to  share  profits  and  bear  losses  equally,  and  each  is  to  draw 
a  salary  of  $150  a  month. 

D.  L.  Morrison  invests  Cash  $2,000,  Merchandise  Inventory  $7,875.50, 
Office  Equipment  +851).  Delivery  Equipment  $1,250.  He  owes  a  15  day 
note  for  $1,775.50  at  6%,  dated  May  1,  192—,  in  favor  of  L.  D.  Key,  which 
the  business  assumes. 

II.  L.  Brown  invests  Cash  $7,500  and  a  10-day  note  of  $2,500  at  II' ,  . 
dated  May  1,  192     ,  against  W.  B.  Owen,  which  he  guarantees. 

Each  asset  is  a  debit  and  each  liability  is  a  credit  in  the  opening  entry  in  the  Journal. 
Two  Journal  entries  are  required  to  show  each  partner's  investment.  Chuck  the  c;ish 
items  in  the  Journal  to  show  they  are  not  to  be  posted.  Enter  cash  on  the  debit  side  of  the 
Cash  Book,  D.  L.  Morrison  $2,000,  H.  L.  Brown  $7,500,  investment,  and  check  these  items 
to  show  they  are  not  to  be  posted.  Entering  cash  on  the  debit  side  of  the  Cash  Book,  Debits 
Cash,  just  as  if  it  were  posted  to  the  debit  of  a  Cash  account  in  the  Ledger.  See  Partner- 
ship Accounting  page   104. 

2b.  May  2.  Bought  of  Empire  Fixture  Co..  S  Show  Cases  @  $87.50;  20  Stool 
Chairs  @  $12.50;  15  Tables  @  $17,50.  (Debit  Store  Fixtures  on  the 
credit  side  of  the  Cash  Book.) 

.'3b  May  2.  Gave  Central  Stationery  Co.  a  check  for  $187.50  for  blank  books 
and  office  stationery. 

Debit  Administrative  Expense  on  the  credit  side  of  the  Cash  Book.  Place  the  amount 
in  the  Administrative  Expense  column  and  check  the  item  in  the  L.F.  column,  to  show 
it  is  not  to  be  posted. 

4b.  May  2.  Purchased  of  J.  M.  Sellers  &  Co.,  Boston,  Mass.,  merchandise 
as  per  Invoice  No.  1.  3/15,  n/60,  $1,215.45. 

Enter  in  Purchases  Book.  It  is  not  necessary  to  itemize  the  entry  in  the  Purchases 
Book,  because  the  invoice  is  filed  for  ready  reference.  Always  get  the  address  of  a 
person  or  firm  in  the  first  entry  of  a  transaction  with  that  person  or  firm  so  the  address 
will  appear   in   the   Ledger   account.     Enter  the  terms  in   the   explanation   column. 

5b.  Ma}'  2.     Received  cash  for  sundry  cash  sales,  $387,50. 

Credit  "Sales"  on  the  debit  side  of  the  Cash  Book.  Use  scratch  paper  and  make 
a  journal  entry  of  this  transaction  and  study  how  this  Cash  Book  entry  debits  Cash 
and  credits  Sales. 

6b.  May  3.     Sold  to  A.  R.  Parsons  &  Co.,  Utica,  N.  Y.,  2/15,  n/30,  25  brls.  G. 
Flour  @  $8.75;  55  cs.   R.  Sweet  Corn   @  $5.25.     Sold  to  Dalton  Pins 
Milwaukee,  Wis..  2/15,  n  30,  55  brls.  Early  Potatoes  (a>  $7.15:  1,(10(1  IDs. 
M.  &  J.  Coffee  @  38c. 

Enter  in  the  Sales  Book.  The  sales  must  be  itemized.  There  are  different  ways  of 
keeping  the  sales,  but  the  principle  is  always  the  same.  They  may  be  kept  in  a  Sales 
Book  as  shown  in  this  set,  or  bills  may  be  typewritten  ami  :i  carbon  copy  of  each  .sab- 
kept  in  a  binder  and  posted  from  this  carbon  to  the  debit  of  each  customer's  account. 
Then  the  total  of  all  the  sales  at  the  end  of  the  month  posted  to  the  credit  of  ''Sales" 
account. 

7b.  May  4.  Gave  Regan  Printing  Co.  a  check  for  $135.60  for  printing  adver- 
tising matter.  (Debit  Selling  Expense  on  the  credit  side  of  the  Cash 
Book.  Place  the  amount  in  Selling  Fxpense  column,  and  check  the  item 
in  the  L.F.   column.) 

8b.  May  4.  Sold  to  T.  J.  Akin  &  Sons,  Akron.  O.,  2/15,  n  30.  50  cs.  12  lb. 
Chocolate  @  $6.25;  50  cs.  Silver  Prunes  @  $5.15.     (6b.) 


64  BOOKKEEPING  AND  ACCOUNTING 

!tli.  May  .">.     Received  $4!)7 .:r>  from   A.   EL  Parsons  &  Co.,  which  pays  bill  of 
May  3,  allowing  2<  .    discount,  $10.15. 

Credit    A.  T{.  Parsons  &   Co    on  the  debi)   side  of  the  Cast    Booh   entering  $497.35  in 

the  "General"   column,  and   $10.15   discount    in   the   "Sales    Discount"   column.     Study 

isli  Book  entry  by  making  a  journal  entry  on  scratch  paper  and  T-Ledger  accounts. 

Cash  $497.35 

Sales    Disi  KL15 

A.  R.  Parsons  &  Co  $507.50 

Cash  Sales  Discount  A.  E.  Parsons  &  Co. 


197.35     |  10.15     |  197.35 

I  I  I       10.15 

Cash  would  not  be  posted,  because  the  $197.::  1  is  debited  by  being  entered  on  the 
debit  side  of  the  Cash  Hunk.  Sales  Discount  would  not  1"-  po  ted  because  the  $10.15 
would  t;o  into  the  footing  of  the  special  column  at  the  end  of  the  month  to  the  debit  of 
Sales  Discount.  The  only  posting  from  the  Cash  Book  at  present  is  the  credit  ot'  A.  R. 
Parsons  i  Co.,  in  two  items,  $497.35  for  the  cash  he  paid  and  $10.15  for  the  discount  in 
the  Sales  Piscount  column,  instead  of  the  $507.50  as  shown  in  the  journal  entry,  but  which 
amounts  to  the  same.  Whenever  a  Cash  Book  entry  is  not  (dear,  make  a  journal  entry 
and  T  Ledger  accounts  on  scratch  paper,  as  shown. 

10b.  May  5.     Received  cash  Eor  sundry  cash  sales  $527.95.  (5b.) 

111.  May  G.  Allowed  Dalton  Bros.  $39.85  for  damaged  goods  on  lull  of  May 
3.  Received  a  credit  memorandum  Eor  $64.85  from  J.  M.  Sellers  &  Co, 
Allowance  fur  shortage  on  Invoice  No.  1.     May  2.     (Enter  separately  in 

Journal.     See   1  la  and  12a. 

li'b.  May  G.  Purchased  of  Fruitvale  Stores  Co.,  Toledo,  Ohio,  merchandise 
as  per  Invoice  No.  i'.  :5  15,  n  GO,  $1,185.75.  Purchased  of  Walters  & 
Anderson.  Cleveland,  Ohio,  ::  15,  □  60,  $1,236.50.  (4b.  May  2.  En- 
ter  in    Purchases   Book   separately,  i 

Pile  May  ii.  Received  $718.73  from  Dalton  Bros,  which  pays  balance  of 
$733.40  on  hill  of  Maj  3,  allowing  i",   discount. 

14b.  May  6.     Received  cash  for  sundry  cash  sales  $519.25.     (5b.) 

15b.  May  G.     Paid  .1.  M.  Sellers  &  Co..  $1,116.08  which   pays  balance  of  In- 
voice No.  1,  $1,150.60  in  full,  deducting  '■'•',   discount. 
Debit  .1.   M.  Sellers  &  Co.  $1,150.60  on  tic  credit  -id,'  of  tic  Cash  Book,  because  we 

have  paid  them  this  amount.  (Check  $1,116.08  plus  '■'■'•  discount  >:;t.."iL'.  Credit  Pur- 
chases Discount  .+.".4.52  on  the  dcl.it  side  id'  the  Cash  Hook.  The  difference  between  thi 
amount  entered  on  the  credit  side  $1,150.60  and  the  amount  of  discount  on  the  debit 
side  $34.52,  is  the  exact  amount  of  cash  paid  out,  $1,116.08.  When  posted  this  will  affect 
.1.  M,  Sellers  a  i  o  account  properly  on  the  debit  Bide,  and  Purchases  Discount  Properly 
on  the  credit  side,  and  leaves  the  cash  to  show  correctly.  Make  a  journal  entrj  mi 
scratch   paper  ami   T  Ledger  accounts,  and   study   this   <  ash    Book   entry. 

1Gb.  Ascertain  the  (ash  Balance.  From  the  total  of  the  first  and  third  col 
limns  on  the  debit  page,  deduct  the  total  of  all  three  columns  on  the 
credit  page.  This  difference  is  the  balance  of  cash  on  hand.  The 
"Sales  Discount"  column  is  omitted  because  it  is  not  cash.  It  will 
l.e  found  vor\  convenient  to  place  the  footings  of  each  column  of  the 
cash  hook  in  \<tv  small  pencil  figures  close  under  the  line  of  the  last 
entry  so  they  will  he  out  of  the  way  of  the  next  entry  to  he  made.  See 
(ash  Booh  illustration.  Mo  not  erase  these  small  pencil  figures,  then, 
when   the   cash   is  to   he   halanced   next    time,  add   the   pencil    figures  with 

the  items  below.     This  will  save  adding  the  items  above  these  pencil 
figures  again,  each  time  the  Cash  Booh  is  balanced. 


BOOKKEEPING  AND  ACCOUNTING  65 

Post  the  books  to  date.  Refer  to  the  illustrations  of  these  books 
and  the  postings.  The  footings  of  the  special  columns  and  the  foot- 
ings of  the  Sales  Book  and  Purchases  Book  are  not  posted  until  t he 
end  of  the  month.  Do  not  total  the  Sales  Book  and  Purchases  Book 
until  the  end  of  the  month. 

17b.  May  8.  Paid  Pierce  Oil  Co.  $38.90  for  oil  and  gasoline  for  delivery 
trucks.  (Debit  Delivery  Expense  on  the  Credit  side  of  the  Cash  Book, 
in  the  "General"  column.) 

18b.  May  8.  Sold  to  A.  R.  Parsons  &  Co.  2/15,  n/30.  60  bx.  D.  Peaches  @ 
$4.35;  100  cs.  Ideal  Tomatoes  @  $4.75.  Sold  to  Dalton  Bros.  2/15, 
n/60,  50  brls.  Geneva  Flour  @  $8.75:  50  cs.  Roval  Sweet  Corn  @  $4.25. 
(6b.) 

19b.  May  9.  Purchased  of  J.  M.  Sellers  &  Co.  merchandise  as  per  Invoice 
No.  4.  3  15,  n/60.  $1,437.50.  Purchased  of  Fruitvale  Stores  Co.  mer- 
chandise as  per  Invoice  No.  5,  3/15,  n/60,  $1,386.50.  (4b  and  12b.) 

20b.  May  9.  Paid  D.  L.  Mason  $43.25  for  repairing  and  revarnishing  office 
furniture.  (Debit  Offica  Equipment  Expense  on  the  credit  side  of 
the  Cash  Book.) 

21b.  May  10.  Received  cash  for  sundry  casli  sales  $612.95.   (5b.) 

22b.  May  10.  Delivered  to  D.  L.  Morrison's  home  for  private  use:  10  bx.  D. 
Peaches  @  $4.35;  15  cs.  Ideal  Tomatoes  @  $4.75.  (Enter  in  Sales  Book 
the  same  as  sale  to  a  customer.)  II.  L.  Brown  drew  $135  for  his 
private  use.  (Debit  II.  L.  Brown,  Personal,  on  the  credit  side  of  the 
Cash  Book.) 

23b.  May  10.     Received  a  check  for  $2,504.17   from  AV.  B.  Owen  to  pay  his 
10   day   note   of  $2,500   and    interest   at    6%.      (Credit    Notes   Receivable 
$2,500  on  the  debit  side  of  the  Cash  Book,  and  on  the  next  line  credit 
Interest  and  Discount  $4.17  "for  interest  on  above  note.") 

24b.  May  11.     Received  cash  for  sundry  cash  sales  $512.80. 

25b.  May  11.  Paid  A.  W.  Perkins  $125  for  rent  of  store  building  for  one 
month,  May  1  to  May  31.  (Debit  Administrative  Expense  on  the 
credit  side  of  the  Cash  Book.     (See  4a.) 

26b.  May  11.  Received  $558.60  from  T.  J.  Akin  &  Sons  which  pays  bill  of 
May  4  in  full,  allowing  them  2',  discount  to  which  they  are  entitled. 
Paid  J.  P.  Johnson  $53.25  for  repairing  Store  Fixtures.  (Debit  "Stoic 
Fixture  Expense"  on  the  credit  side  of  the  Cash  Book.)  Paid  Central 
Insurance  Co.  $270  for  policy  on  stock  to  cover  from  May  1  for  one 
year. 

27b.  May   11.     Paid  Fruitvale   Stores   Co.   $1,150.18   which   pays   invoii f 

May  6  in  full,  deducting  3%  discount,  to  which  we  are  entitle.!.     .See 
15b.) 

28b.  May  11.  Sold  to  T.  J.  Akin  &  Sons,  2/15,  n/30,  100  crates  Canteloupe 
@  $3.75;  75  bx.  A.  Cheese.  1.625  lbs.  @  40c.  Sold  to  A.  R.  Parsons  &  Co., 
2/15,  n/30,  75  bx.  12  lb.  Chocolate  (a  $6.25;  40  bx.  A.  A.  Prunes  (a   $4.50. 

29b.  May   11.     Purchased   of  Walters   &    Anderson   merchandise   as    per    In 
voice  Xo    6,  3/15,  n  6tt.  $1,587.65.     Purchased  of  J.  M.  Sellers  ,v   Co., 
merchandise  as  per  Invoice  Xo.   7,  3/15,  n/60,  $4,260.00. 


66  BOOKKEEPING  AND  ACCOUNTING 

301).  May  12.     Received  cash  for  sundry  cash  Bales  $498.20. 

311).  Ma\  12.  Paid  City  Garage  Co.  $37.50  for  garage  charges  on  delivery 
trucks  fur  two  weeks.     I  17b.) 

32b.  May  12.     Paid  IV  &  ().  R.  R.  C„.  *413.25  for  freight  on  goods  purr-based. 
Debit    Freight    In  oil  the  credit  side  of  the  Cash  Book,  i      (See  22a. 

33b.  May  13.  D.  L.  Morrison  and  II.  L.  Brown  each  withdrew  $2,000  from 
their  investment.  (Debil  each  partner's  Capital  accounl  on  the  credil 
side  of  the  ('ash   Boi 

Mh.    May    13.       Paid    office    help    for    two    weeks    $350.      Paid    Sales    Force    for 

two  weeks  $375.  Paid  delivery  drivers  for  two  weeks  $108. 
Debit  Administrative  Expense  $350  on  the  credit  side  of  tin-  Cash  Rook  in  Ad- 
ministrative Expense  column.  Debit  Selling  Expense  $375  on  the  credil  side  of  the 
Cash  Book  in  Selling  Expert  e  column.  Chech  these  items  in  the  I..  P.  column  to  shew 
they  are  in  it  to  be  posted,  .-is  they  are  in  Bpecial  columns  these  amounts  will  be  posted 
in  the   foo  ings  of  the   special   columns   :it    the  end   of  the  month.     Debil    Delivery    K\ 

$108  on  the  credit   Bide  of  the  t 'ash   Booh   in  the  "General"  Column. 

35b.  May  i3.     Sold  to  Dalton  Bros.,  2  15,  □  30,  1,000  lbs.  M  &  .1  Coffee  (§ 

43c;  65  bx.  12  lb.  Chocolate  (a   $6.25.     Sold  to  T.  J.  Akin  &  Sons.  2   15, 

n  30,  25  cs.   Butter  Prints,   1,030  lbs.   (5    50c;  65  bx.  silver   Prune-   (g 

$5.15.     Sold  at  a  delivered  price.     Prepaid  the  freight  to  C.  &  A.  R.  R 

Co.  $40  for  first  bill  and  $43.25  for  the  other. 

Enter  separately  in   the  Sales  Book.     Debit   Freight   Out   on   the  credit    side  of  the 

Cash  Hook.     This  freight   is  a  selling  expense,  t mt    it   is  better  to  keep   it    in  a  separate 

"Freight   Out  ' '   account.      It    should   appear  as   a    Selling    Expense   in    the    Profit    ami    Loss 

Statement.     Ascertain  the  cash  balance  and  post   the  books  to  date.     (See  16b.) 

36b.  May    15.      Allowed    T.    -I.    Akin    &    Sons    ^!)f>..">4   for   damaged    g Is  on 

bill  of  May   11.     Allowed   A.   R,  Parsons  ,y   Co.  $58.95  lor  shortage  on 

bill  of  May  8.  Dalton  Bros,  returned  10  cs.  Royal  Sweet  Corn  (§ 
$4.25   from 'bill    of    .May   8,    for   credit.    (12a.) 

37b.  May  15.  Received  an  allowance  of  $129.35  from  J.  M.  Sellers  &  (  o. 
lor  damaged  goods  on  Invoice  NO.  4.  May  'J.  Received  an  allowance 
of  $126.50  from  Fruitvale  Stores  Co.  for  shortage  on  Invoice  No.  5, 
.May   9.      'See    11a.) 

18b.   May  1.").  Paid  L.  I).  Key  $1,779.94  for  I).  L.  Morrison's  note  of  $1,775.50, 

15  days  at  <i',  and  interest,  which  the  business  assumed.  (Debil  Notes 
Payable  on  the  credit  side  of  the  Cash  Hook  $1,775.50,  and  on  the  next 
line,  debit    Interest  and  Discount  $4.44.) 

39b.  May  Hi.  Paid  J.  M.  Sellers  &  Co.  $1,268.91  and  received  :!'.  discount 
on  balance  of  Invoice  No.  1.  of  $1,308.15.  Paid  Walters  i\;  Anderson 
$1,199.40  which  pays  Invoice  No.  3,  $1,236.50,  in  full,  deducting  :!',  dis- 
count to  which  we  are  entitled.  (15b.) 

'"C  May  H.  'Borrowed  *.">.f)00  at  the  Central  National  P.ank  on  our  10  day 
note  ai   6%,  proceeds.  $4,991.66.     (Credil    Notes  Payable  on  the  debil 

side  of  the  ('ash  Book,  $5,000.  Debit  Interest  and  Discount  on  the  credil 
side  of  t  lie  ( 'ash  Hook  $8.34.  The  difference  is  the  exact  amount  of  cash  re- 
ceived  from  t  he  bank. 

The  entry  for  the  above  may  be  made  in  Ihe  Journal: 

Cash *  4,001  .(»<"; 

Interest  and  Discount 8.34 

Notes  Payable 

and  the  cash  item  checked  and  entered  on  the  debit  side  of  tht^  Cash  Hook 
and    cheeked    there,    and    the   other   items    posted    from    the  Journal.      The 


B00KKEEP1XC  AND  ACCOUNTING  67 

result  would  be  the  same  as  the  Cash  Book  entry  first  explained.     Si ■ 

accountants  prefer  to  have  the  transaction  show  in  the  Journal. 

411).  May  17.  Received  $663.51  from  A.  R.  Parsons  &  Co.  on  accounl  and  al- 
lowed 2%  discount  on  balance  of  hill  of  May  8,  .+ii77.(ir».  Received  $595.35 
from  Dalton  Bros,  to  pay  balance  of  $607.50  on  bill  of  May  8,  allowing 

2',   discount.     (9b.) 

42h.  May  17.    Received  cash  for  sundry  cash  sales  $714.2."). 

43h.  May  IS.  D.  L.  Morrison  drew  $12.")  for  his  private  use.  (Debit  D.  h. 
Morrison,  Personal  on  the  credit  side  of  the  Cash  Book.) 

44b.  May  19.  II.  L.  Brown  returned  $23.7")  of  the  money  drawn  for  private 
use.     (Credit  H.  L.  Brown,  Personal,  on  the  debit  side  of  the  Cash  Book.  I 

45b.  May  19.  Ascertain  the  casli  balance,  and  post  the  books  to  dale  (See 
16b.) 

46b.  May  20.  Received  $909.89  from  T.  .1.  Akin  &  Sons  on  account  and  al- 
lowed 2%  discount  on  balance  of  bill  of  May  11,  $92S.46.  (9b.) 

47b.  May  20.  Sold  to  A.  R.  Parsons  &  Co..  2/15,  n/30,  125  bx.  D.  Peaches  @ 
$4.35;  75  cs.  Ideal  Tomatoes  («  $4.75  •,  85  cs.  Red  Raspberries  @  $4.!i.> 
Sold  to  Dalton  Bros.,  2/15,  n  30,  75  brls.  G.  Flour  @  $8.75;  85  cs.  1!. 
Sweet  Corn  @  $4.25;  65  bx.  12  lb.  Chocolate  @  $6.25;  1,000  lbs.  M  &  J 
Coffee  @  53c.  Sold  to  T.  J.  Akin  &  Sons,  2/15,  n/30,  25  cs.  Butter  Prints. 
1.250  lbs.  @  53e;  80  cs.  C.  Coffee  Ui  $8.25;  (in  brls.  Early  Potatoes  @ 
$6.15;  100  bx.  Silver  Prunes  @  $5.15.     (lib.) 

48b.  May  22.  Received  cash  for  sundry  cash  sales  $728.90.  (5b.)  Received 
$635.77  from  A.  R.  Parsons  &  Co.  on  account  and  allowed  2' ,  discount  on 
bill  of  May  11,  648.75.     (9b.) 

49b.  May  23.  D.  L.  Morrison  and  II.  L.  Brown  each  gave  a  check  for  $1,000 
as  an  additional  investment  in  the  business.  (Credit  each  partner's  Cap- 
ital account  on  the  debit  side  of  the  Cash  Book.     (See  paragraph  8.) 

50b.  May  23.  Received  a  30  day  note  for  $2,790  at  6',  of  this  date  from  Dal- 
ton Bros,  on  account.  Received  $832.75  from  T.  J.  Akin  &  Sons  on  ac- 
count and  allowed  2f;    discount  on  bill  of  May  13,  $840.75. 

51b.  May  23.  Gave  J.  M.  Sellers  &  Co.  a  30  day  note  for  $4,260  at  6%  of  this 
date,  on  account.  Received  a  3D  day  note  of  $1,750  at  (i','  of  this  date. 
from  T.  J.  Akin  &  Sons,  on  account. 

52b.  May  24.    Received  cash  for  sundry  cash  sales  $5(>4.80. 

53b.  May  25.     Paid  Fruitvale  Stores  Co.  $1,222.20  on  account  and  received 

3%    discount  on  balance  of  $1,260.      (15b.) 

54b.  May  26.     Paid  Walters  &   Anderson   $1,540.02  on  ai un1   and   received 

3','   discount  on  invoice  of  May  11,  $1,587.65.   (15b. 

55b.  May  26.     Sold  to  Dalton  Bros.,  2  15.  n  30,  60  brls.  G.   Flour  (5    $8.75; 

75cs.  Royal  Sweet  Corn  (a  $5.25.     Sold  to  T.  -I.  Akin  &  Sons  2  \:>,  n/30. 
75  cs.  No.  1  Raisins  @  $4.75;  65  brls.  \V.  Peaches  (a  $9.25. 


68  BOOKKEEPING   AND  A.C<  OTJNTING 

56b.  May  26.     Paid  our  $5,000  note  al  the  Central  National  Hank  by  giving 

a  new  noic  for  $3,500  for  30  'lavs  al  6%,  and  a  check  for  the  difference 

and  interest   on  the  new    note. 

Debit  Notes  Payable  $5,000  on  the  credit  Bide  of  the  Cash  Book.  Debit  Interest  and 
Discount  $17.50  (on  the  new  note)  on  the  credit  side  of  the  Cash  Book.  Credit  Notes  Pay- 
able $3,500  on  the  <lel.it  >i.le  of  the  Cash  Book.  The  difference  is  the  exact  amount  of 
cash  paid  out,  and  when  posted  the  other  accounts  will  be  properly  debited  and  credited. 
It  preferred,  the  entry  may  be  made  in  the  Journal  and  the  Cash  item  checked  and  the 
in   ili.    i  and   checked   there.     The   other   items   posted   from  the 

Journal  will  give  the  Bame  result,  and  probably  a  better  record. 

Notes   Payable   *o,000.00 

rest   and   Discount    17.50 

Notes   Payable    

V    (ash      1,517.50 

Paid  loan  at  the  bank  by  giving  a  new  note  for  $3,500  for  30  days  al  *'•' ■   and  cash  for 
the  din.  rence  and  in  I  he  new  note. 

57b.  .May  _'(i.    Received  cash  for  sundry  cash  sales  $849.70. 

58b.  .May  27.  Paid  office  help  for  two  weeks  $350.  Paid  sales  force  for  two 
weeks  $375.     Paid  delivery  drivers  for  two  weeks  $108.  (34b. 

59b.  Ma.\  28.  Purchased  of. I.  M.  Sellers  c\;  Co.,  merchandise  as  per  Invoice  No. 
8,  •'!  15,  n  60,  $1,341.25.  Purchased  of  Pruitvale  Stores  Co..  merchandise 
as  per  Invoice  No.  It.  :■!  15,  o  60,  $1.7!Mi.P>.  Purchased  of  Walters  ec  An- 
derson, merchandise  as  per  Invoice  No.  10,  3   15,  n  60,  $1,432.75. 

60b.  May  31.  Paid  partners'  salaries  for  the  month,  $150  each.  (Debit  Ad- 
ministrative Expense  on  the  credit  side  of  Cash  Cook.) 

61b.  I'ost  the  Books:  Total  the  Purchase  Book  and  post  the  total  to  the  debit 
side  of  the  Purchases  account.  Total  the  Sales  Book  and  post  the  total 
amount  of  sales  to  the  credit  side  of  Sales  account.  Total  the  columns  of 
each  side  of  the  Cash  Book.  Bide  and  fool  the  Cash  Booh  as  shown  in  the 
illustration  of  the  Cash  Book,  bringing  in  the  "balance"  on  the  credil 
side  in  red  ink.  Bring  the  cash  balance  down  below  the  double  ruled 
lines  on  the  debit  side  in  black  ink,  and  date  it  "June  I."    This  leaves 

Hie  Cash  Book  ready  to  receive  the  new  business  for  June.  If  new  pages 
arc  to  be  used  for  the  Cash  Book,  this  cash  balance  is  carried  to  the  new 
debit  page  and  entered  in  the  General  column  and  checked.  I'ost  the 
footing  of  "Sales  Discount"  column  to  the  debit  of  S;des  Discount  ac- 
count. Bust  the  footing  id'  "'Sales"  column  to  the  credit  of  Sales  ac- 
count. 

On  tin'  credit  side,  posl  the  footing  "f  Administrative  Expense  column 
to  tin'  debit  of  Administrative  Expense  account,  and  post  the  footing  of 
Selling  Expense  column  to  the  debit  of  Selling.  Expense  account.  The  stu- 
dent is  familiar  with  the  posting  of  the  Journal.  Usually  the  books 
are  posted  in  this  order:  Purchases  Book,  Sales  Book.  Journal,  debit 
side  of  Cash    Book,  credit    side  of  Cash    Book. 

62b.  Prepare  a  Trial  Balance:  Bring  the  cash  balance  into  the  Trial  Balance. 
Before  beginning  the  Trial  Balance,  read  57a,  chapter  II.  Prepare  and 
posl  .journal  entries  to  record  the  following  supplementary  facts  qo1 
found  in  the  hooks.    See  paragraph  -'  to  29. 


BOOKKEEPING  AND  ACCOUNTING  69 

Merchandise  Inventory,  May  31 $12,876.40 

Insurance   (expired)    22.50 

Accrued  Assets : 

Interest  accrued  on  Notes  Receivable 6.05 

Unpaid  office  help  for  half-week 87.50 

Unpaid  sales  force  for  half-week 1)3.75 

Unpaid  delivery  drivers  for  half-week   27.00 

Unpaid  garage  bill  for  trucks 32.50 

Deferred  Charges  to  Operation : 

Postage  and  office  supplies  on  hand 54.35 

Advertising  matter  on  hand 62.50 

Depreciation : 

10%  on  office  equipment   85.00 

On  Store  Fixtures 121.50 

10%  on  delivery  equipment  125.00 

Reserve  for  Doubtful  Accounts : 

10%  of  Accounts  Receivable 365.35 

S3b.  Having  posted  the  adjustment  journal  entries  to  record  the  above  in- 
ventories (except  Merchandise  Inventory)  in  the  books,  prepare  a  Final 
Trial  Balance  as  in  Illustration  No.  21.  From  this  Final  Trial  Balance, 
prepare  a  Balance  Sheet  similar  to  Illustration  No.  22  or  No.  23,  and  a 
Profit  and  Loss  Statement  similar  to  Illustration  No.  24. 

The  preparation  of  the  Balance  Sheet  and  the  Profit  and  Loss  State- 
ment for  a  Partnership  is  the  same  as  in  the  case  of  a  sole  proprietor,  ex- 
cept that  each  partner's  present  capital  is  shown  in  the  Balance  Sheel 
in  the  place  of  the  single  proprietor,  as  in  Illustration  No.  22,  and  both 
together  are  equal  to  the  difference  between  the  assets  and  liabilities. 
In  the  Profit  and  Loss  Statement,  each  partner's  share  of  the  net  profit 
is  added  to  his  net  investment  in  proving  this  Statement  with  the  Bal- 
ance Sheet.  See  Illustration  No.  24,  and  also  read  paragraph  67  to  69a 
inclusive. 
64b.  Close  the  Books:  Prepare  and  post  closing  journal  entries  to  close  the 
Nominal  accounts.  See  paragraph  35  to  37.  Post  these  journal  en- 
tries as  instructed  in  paragraphs  35  to  37  in  order  to  show  the  Trading 
Section  and  the  Profit  and  Loss  Section  in  the  Profit  and  Loss  account 
as  in  Illustration  No.  27. 
65b.  Close  the  Partners'  Personal  accounts  into  their  Capital  accounts  ami 
credit  each  partner's  Capital  account  for  his  share  of  the  net  profit. 

Two  journal  entries  are   required,   one   for  the  adjustment  of  each 
partner's  account. 

D.  L.  Morrison,  Capital $    239.65 

Profit  and  Loss 2,156.10 

D.  L.  Morrison,  Personal $    239.65 

D.  L.  Morrison.  Capital 2,156.10 

To  close  D.  L.  Morrison's  Personal  account  into  his  Capital  account, 
and  to  credit  his  Capital  account  for  his  share  of  the  net  profit. 

II.  L.  Brown,  Capital *    111.25 

Profit  and  Loss 2,156.10 

H.  L.  Brown,  Personal 11 1 .25 

H.  L.  Brown,  Capital   -\  156.10 

To  close  H.  L.  Brown's  Personal  account  into  his  Capital  account,  and 
to  credit  his  Capital  account  for  his  share  of  the  net  profit. 


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BOOKKEEPING  AND  ACCOUNTING 

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rLLUSTRATION    M>.    :ss.      I.KH«;i:k    ACCOUNTS 


BOOKKEEPING  AND  ACCOUNTING 


75 


PROBLEM  7.  DETAILED  STATEMENTS  AND  SCHEDULES 

Prepare  a  detailed  Statement  (or  analysis  i  reconciling  the  amount  of  Ad- 
ministrative Expense  and  the  amount  of  Selling  Expense  in  the  business  of 
D.  L.  Morrison  &  Co.  Prepare  Schedules  reconciling  Accounts  Receivable  and 
Accounts  Payable,  giving  the  due  dates.     See  paragraphs  33  and  34. 


PROBLEM  8.     ANOTHER  METHOD  OF  CLOSING  THE  LEDGER  BY  JOURNAL 

ENTRIES 

63.  The  same  Trading  Accounts  and  Profit  and  Loss  accounts  are  used  in 
the  following  that  were  used  in  Chapter  1 1.  The  Nominal  accounts  are  taken 
from  the  Final  Trial  Balance.  Illustration  No.  21.  The  student  will  use  journal 
and  ledger  paper  and  set  up  the  accounts  as  shown  and  post  the  closing  journal 
entries. 

This  method  may  be  preferred  where  it  is  not  desired  to  show  the  Trading 
Section  and  the  Profit  and  Loss  Section  in  the  Profit  and  Loss  account.  The 
procedure  is  logical  and  obtains  the  same  results  as  by  the  method  previously 
used. 

Copy  the  following  Ledger  accounts  on  ledger  paper,  giving  each  account 
six  lines : 


Trading  Accounts 

Merchandise  Inventory 


Dee. 

1 

8972.50  || 
Purchases 

Dec. 

31 

15353.80  ||  Dec.  31 
Purchases  Discount 

478.60 

||  Dec.  31 

235.91 

Freight  In 

Dec. 

31 

521.65  || 
Sales 

Dec. 

31 

379.10  ||  Dec.  31 
Sales  Discount 

14726.15 

Dee.  31  86.51 


Profit  and  Loss  Accounts 
Administrative  Expense 
Dec.  31     1261.88  || 

Selling  Expense 
Dec.  31     1341.15  || 

Delivery  Expense 
Dec.  31        488.40  || 

Interest  and  Discount 
Dec.   31        23.85  || 

Real  Estate  Expense  and  Income 
Dec.  31       166.25  || 

Loss  on  Doubtful  Accounts 
Dec.  31        213.24  II 


The  Merchandise  Inventory  Dec.  31   is  $16,462.81,  the  same  as  was  used  in 
the  previous  closing  of  the  books  in  Chapter  II. 

The  following  closing  journal  entries  are  required  to  close  the  above  ac- 
counts, and  to  set  up  the  present  merchandise  inventory  as  an  asset.     Record 


76 


BOOKKEHPIXt;  AND  ACCOUNTING 


these  journal  entries  on  journal  paper  and  posl  them  to  the  above  Ledger  ac- 
counts.   Studj   each  entry  while  recording  it  and  when  posting  it. 


December  31.  192 


Furohascs 

Merchandise  Invt  .  Dec   1 


To  transfer  the  Inventory         fiO 

to  the  Purchases  account  P972  50 


Purchases 
Freight  In 


-31- 


To  close  Freight  In  and       521  65 
transfer  this  cost  to  Pur  B21  65 

chases 


51- 


Purchasee  Discount 
Purchases 


Kerohandlee  Invt.  Dec. 31 
Purchases 


To  close  Purchases  Dis- 
count and  credit  Purchases 
for  discount  received 


-31- 


To  set  up  the  present  In- 
ventory as  an  asset  and 
credit  Purchases 


235  91 


16462  81 


235  91 


16462  til 


Sales 

Purchases 


-31- 


To  close  Purchases  and 
transfer  cost  of  poods 
sold  to  Sales  account 


7670  63 


7670  63 


Sales 

Sales  Discount 


-31- 


To  close  Sales  Discount 
and  charge  Sales  for  the 
discount  allowed 


6b  fl 


66  51 


-31- 


Sales 

Profit  and  Loss 


Profit  and  Loss 

Administrative  FXponse 
Selling  Expense 
Delivery  Rxpense 
Interest  and  Discount 
Real  Hstate  Expense 
and  Income 


To  close  Sales  and  trans-    65G9  91 
fer  the  gross  profit  to 
Profit  and  Loss  account 


-31- 


To  close  these  Profit  and    3494  77 
Loss  accounts  and  transfer 
these  expenses  to  the  Prof- 
it and  Loss  account 


6569  91 


1261  88 

1341  IB 

486  40 

23  85 

166  25 

213  24 


II.I.t'STKATTON  NO.  39.   CLOSING  ENTRIES 


Having  posted  the  above  journal  onirics  to  the  Ledger  accounts,  rule  and 
foot  the  accounts  thai  balance.  Rule  a  single  red  ink  line  under  $8,972.50  mi 
each  side  of  Merchandise  Inventory  leaving  this  account  open,  showing  the 
present  Inventory,  $16,462.8]  on  the  debil  as  an  asset.  Close  the  Profit  and 
Loss  account  and  bring  the  net  profit  or  surplus  down  holow  the  ruling,  and 
compare  ihis  Profil  and  Loss  account  with  the  previous  Profit  and  Loss  account. 


BOOKKEEPING   AND  ACCOUNTING 


i  i 


CLOSING   OUTLINE 


The  following  closing  outline  may  aid  the  student  to  get  the  order  of  pro 
eedure  in  closing  a  set  of  hooks  by  tins  method  fixed  in  the  mind,  or  it  may 
he  used  for  reference. 


CD 

7 

03 

8. 

CC 

9. 

-i 

-d 

10. 

a 

Purchases 

Account 


1.  Merchandise   Inventory  at   beginning  of  period,  close  into 

2.  Freight  In  account,  close  into 

3.  Purchases  Discount  account,  close  into 

4.  Merchandise  Inventory  ai  end  of  period  to  credit  of 

5.  Returns  ami  Allowances  from  Purchases,  close  into 

Note:    Now  the  difference  between  the  two  sides  of  Purchases  account  is  "the 

cost  of  the  goods  sold." 
G.     Close  Purchases  into  Sales  to  transfer  "the  cost  of  g Is  sold"  to  the  debit 

side  of  sales. 
Freight  Out  account,  'dose  into 

Sales    Discount,   close   into  \   Sales  Account 

Returns  and   Allowances  from  sales,  close  into 
Note:     Now  the  difference  between  the  two  sides  of  Sales  account  is  the  "gross 

profit." 
Close    Sales    into    Profit    aio!    Loss   to   show   the   "gross   profit"    on    the   credit    of 

Profit   ami  Loss  account. 

This  closes  the  Trading  Accounts.  In  the  preceding  work  there  are  no 
accounts  for  Nos.  5  and  9,  because  the  Returns  and  Allowances  from  Purchases 
(No.  5)  were  credited  to  Purchases,  and  the  Returns  and  Allowances  from  Sal.-, 
(No.  !i)  were  debited  to  Sales,  however,  when  these  separate  accounts  are  kept, 
they  are  closed  as  in  the  outline.  Freight  (hit  account  does  not  appear  in  the 
preceding  work,  but  when  this  account  is  kept,  as  explained  later,  it  is  closed 
as     liown  or  direct  to  Profit  atol  Loss. 

11.  Administrative  Expense,  close   into 

12.  Selling  Expense,  close  into 

13.  Delivery  Expense,  close  into 

14.  Interest  and  Discount,  close  into 

15.  Real   Estate    Expense  and    Income    and   any   other   expense 
accounts,  such  as  wages,  salaries,  rent,  taxes,  etc.,  .lose  into 


■    Profit    and    Loss 
Account 


BUSINESS  OE  COMMERCIAL  PAPERS. 

63A.  The  following  illustrations  show  the  forms  of  business  papers  to  be 
used  in  the  work  in  Chapter  II  ami  Chapter  III.  The  note,  draft  and  ac- 
ceptance have  already  been  shown,  and  tiro  not  included  here.  The  student 
will  receive  the  Incoming'  Papers  from  the  Incoming  Papers  Tab,  and  will 
make  out  all  Outgoing  Papers  required  in  each  transaction. 


ILL     MEAD 


Jh?/7  9;^Y^> 


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'-rt^is,  ^^rf^r-ns  -  5" !9iL^ 


^,r^->-*ysfS-*. 


■sW  I 


->/<*  ^ 


eo'jCMT  or 

W.  J.   EMERSON  &  CO. 
General   Merchandise 


-T/?    Jt-Ss  ^/f"J^.s^^.J,*^i 


.i  r  J*/^  jtPrf  £r* 


_.-.'., 


2./ 2-.ro 


■ 


T/t 


l? 


■'• 


ILLUSTRATION    NO.    -to.     A    V.UA.    FOR    THE    SALE    OF    I 


7> 


IinoKKKKlMNi;    AND   ACCOUNTING 


Bills  and  Invoices:     The  terms  "Bill"  and  "Invoice"  mean  the  same,  a 
list  of  the  goods  boughl  or  sold,  with  the  prices,  terms  and  amount.     Poi 
venience  here,  the  term  "Bill'  is  used  for  the  bill  of  -u.»K  sold  to  customers. 
and  the  term  "Invoice"  is  used  for  the  list  of  g is  purchased. 

63B.  A  Memorandum  of  Credil  or  Credil   Memorandum  is  sent  to  a  cus- 
ininrr  in-  ivci'iwil  from  ;i  creditor,  wIkii  an  allowance  is  made  for  shortage  on 

nt  of  an  error,  damaged  g Is.  goods  not  up  to  grade,  for  overcharge,  or 

for  goods  returned. 


M    cA.  J  ^f^,^-,  ^7  A-2-y-^ 


't^lsl^t^r^f*  **-7*  ^  i»2-    , 


*aL 


\V.  .1.   EMERSON   &   CO. 

D(«k«aa   m 

(',  IN  BR  A  I.     UIRCBANDISE 


i,^x^-Jrs(s/^^ 


<Mt   CMCDfT   rtujm  ACCOUNT   A*   FOLLOWS 


OA 


-/•' 


• --  .-";'..•-  ;„/.-  ■    .  •:  i  .-.-.  a. 


-2-1 


~7 


^ir-r-e£^  s-i^JJL-rAjLs  /h-fs  \Aa^,J  L 


^JJ- 


£4 


II.I.rsTKATION     NO.      II.      CREDIT     MEMORANDUM 


t'i'-'A'.  A  Reeeipl  is  usually  given  or  received  upon  the  payment  of  renl  and 
other  cases  of  payment.  In  the  case  of  customers,  the  bill  is  receipted  and  re- 
turned. Receipts  arc  usually  kept  in  book  form  like  checks,  with  a  stub  to 
be  filled  out. 


f^r7^t-t?^-y  /f, 


tyt/^f. /Az?^t^A^^7^ 


^2^-<r<^.  f~/9  l?C^6*^--*-,f  J&4- ^Ar-*-^ 


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(OfO^?  J>^*-*S^7-~r?S 


II.l.rRTIlATlcV     NO.      12.      A     RECEIPT 


BOOKKEEPING    AND   ACCOUNTING 


79 


63D.  A  Statemenl  of  Account  is  usually  sent  to  all  customers  who  have 
open  accounts  on  the  Ledger  the  first  of  each  month.  This  statement  may 
be  itemized,  and  if  payments  have  been  made,  the  credits  are  shown.  How- 
ever, in  many  cases  only  the  balance  at  the  first  of  the  month  is  shown,  and 
an  itemized  statement  sent  if  requested. 


MONTHLY  STATEMENT 


M      ^Q-     1¥l^^KK^ 


jzr*-"-< 


-*=?- 


-r -^-/ y    /. 


:-- 


.f.u? 


'j£j[^2mLi 


19,2- 


IN  ACCOUNT  WITH 

W.  J.  EMERSON  &  CO. 

OCAkCKI   IN 

General   Merchandise 


<tO!^  ,-c- 

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/ 

ILLUSTRATION'  NO.    43.      MONTHLY  STATEMENT   OF    ACCOUNT 

63E.  A  Cashier's  Check  is  drawn  by  the  Cashier  of  a  bank  upon  his  own 
bank  and  signed  by  himself.  It  is  used  for  the  payment  of  collections  made 
for  customers,  and  for  paying  the  bank's  obligations. 


CENTRAL  NATIONAL  BANK 


Pay  to  tba  order  of 


7/-a& 


CWCACO,  )/77 s*l  s<st^!Zs^-nyt  '  .^19JL 


7? 


W-^7- 


^S 


({.''    .'  <!  f:    ~£k*    .\.S\-  LI  t    2 


6 

CASHIER'S   CHECK 


IN  COLLEGE  CURRENCY 


.Dollars 


2*t#  ?77. 


/^r^r^fs. 


ILLUSTRATION    NO.    44.      A    CASHIERS    CHECK 


80  BOOKKEEPING   AND  ACCOUNTING 

63F.   A  Bank  I  >raf1  is  a  drafl  drawn  by  one  bank  on  another  bank  in  whi<  a 
the  bank  1  ej  on  deposit.    It  is  called  " Exchange "  and  is  usually  drawn 

me  bank  in  a  large  city.    A  drafl  on  ;i  New  York  bank  would  be  • 
New  York  Exchange. 


CENTRAL   NATIONAL   BANK 


n 

Cmicaco        .       2   ,  ?  S/  ?- *f, 


Pay  io  tbe  order  ol  .  .    rJl^r-^-?- 

f//>-r* ,-t^/ y-rst^vt^fst-f^rf  (/ "  .-  <>  /  _  ^y-  0-*?S  J  *K-  /ft a  - Dollars 


l»  COLLEGE  CO«*CNCI 


T<.  Ih«   FIRS'?   NATIONAL   HANK   I 
YORK,    N     V  ) 


^  377  9??;//.. 


ILLUSTRATION    NO.     15.      HANK   DRAFT.      NEW   YORK    EXCHANGE 


63Ci.  A  Persona]  t Iheck  is  a  check  drawn  by  a  depositor  on  the  bank  in  which 
his  money  is  on  deposit.  The  bank  accounl  is  usually  kepi  on  the  check  stub. 
Each  deposil  is  entered  on  tin1  stub  and  the  stuh  is  filled  mil  when  a  check 

is  written  and  tin'  balance  broughl  down,  so  that  tin'  actual  balance  is  always 
(.n  tin1  stub  when  the  nexl  check  is  to  lie  written.  The  stub  should  be  tilled 
out  before  writing  the  check  for  Tear  it  may  be  overlooked. 


Chicago.  "I     \Az^7/  .7/  .        ;o  —     /vo / 

CENTRAL  NATIONAL  BANK 

7<<^/^^^<M^W%  p  ■>/  la  rs 


II. I  i  IN     Nl  I.     16.      A     PERSI  IN  \I.    CHECK 

Commercial  papers,  such  as:  cheeks,  promissory  notes,  acceptances,  postal 

n c.\  orders,  and  express  money  orders,  when  made  payable  to  bearer  or  to 

order,  are  negotiable  papers.  That  is.  the  payee  or  holder  may  legally  transfer 
such  negotiable  paper  to  another.  \>\  indorsement.  The  indorsemenl  transfers 
the  legal  right  to  collect  the  value  represented  in  the  paper,  and,  at  the  same 
larantj  thai  the  paper  is  valid  and  genuine,  should  the  payer  fail 
to  pay.  when  the  paper  is  due.  the  holder  can  hold  the  indorser,  by  legally 
presenting  the  paper  for  payment  and  giving  the  indorser  legal  notice. 


BOOKKEEPING  AND  ACCOUNTING 


81 


63IT.  Indorsement:  In  order  to  transfer  a  note,  draft,  acceptance  or  check, 
the  holder  must  write  his  name  on  the  back  of  the  paper.  Always  across  the 
left-hand  eiid.  Hold  the  paper  with  the  left  hand  in  position  yon  would  to 
read  it,  then  turn  it  over,  the  top  toward  you,  and  write  across  the  left  hand 
end.  There  are  a  number  of  ways  to  write  the  indorsement  on  commercial 
paper.    The  purpose  of  the  transfer  should  be  considered. 

Blank  Indorsement  is  the  name  of  the  payee 
or  holder  only.  This  transfers  the  paper.  Any 
holder  may  indorse  and  use  the  paper.  It  be- 
comes the  same  as  if  made  payable  to  bearer. 


Indorsements 


(In  blank) 
W.  J.  Emerson 

(In  full) 

Pay  to  the  order  of 

T.  J.  Akin  &  Co. 

W.  J.  Emerson 

(For  Deposit) 

Pay  to  Merchants  Bank 

for  deposit  account  of 

W.  J.  Emerson 

(For  Collection) 

Pay  to  Merchants  Bank 

for  collection  account 

of 

W.  J.  Emerson 

(Restricted') 

Pay  to  T.  L.  West  only 

W.  J.  Emerson 

(Without  Recourse) 
Pay  to  Order  of 

T.  L.  West,  without 

recourse. 

W.  J.  Emerson 

(For  Guarantee 
I  hereby  guarantee  the 
payment     of    the     within 
note. 

"W.  J.  Emerson. 

'For   partial    Payment) 
Received  on  the  within 
note  Fifty  Dollars   ($50), 
Mar.  15,  192—. 


Indorsement  in  Full.  When  indorsed  in  this 
way,  the  person  to  whom  it  is  transferred  must 
indorse  the  paper  before  any  other  holder  can 
use  it. 

Indorsement  for  Deposit:  Usually  used  on 
checks  to  be  deposited.  When  thus  indorsed, 
the  checks  cannot  be  used  for  any  other  pur- 
pose than  deposit. 

For  Collection:  Usually  used  on  Notes 
placed  in  the  bank  for  collection,  or  in  the 
hands  of  a  collection  agency.  The  words  "Pay 
to  the  order  of"  and  the  name  of  the  bank  or 
collection  agency  may  be  written  above  the 
words.  This  shows  the  purpose  of  the  indorse- 
ment, and  prevents  the  returns  being  used  for 
any  other  purpose. 

Restricted  Indorsement:  Write  "Pay  to 
(name  of  party  to  whom  transferred)  only," 
and  sign  below.  This  makes  the  paper  non-ne- 
gotiable. 

Without  Recourse:  An  indorsement  without 
recourse  means  that  the  party  who  transfers 
the  paper  cannot  be  required  to  make  the  paper 
good  in  ease  of  non-payment. 

For  Guarantee:  This  means  the  indorse!- 
will  make  the  paper  good  in  case  of  non-pay- 
ment, but  after  reasonable  effort  lias  been  made 
to  collect  from  the  maker. 

For  Partial  Payment,  simply  write  the  facts 
across  the  back  of  the  paper,  and  the  date.  This 
indorsement  is  written  on  the  back  of  a  note 
when  the  interest  is  paid  and  when  any  part  of 
the  principal  is  paid. 


82 


BOOKKEEPING  AND  ACCOUNTING 


631.  Check  Book:     Keeping  the  bank  accounl  in  the  check  book  is  a  very 

simple  matter,  yet,  it  requires  attention  and  care.  It  is  easy  to  fail  to  put  the 
deposit  on  the  cheek  stub,  but  it  will  be  found  in  the  bank  pass  book  and  can 
be  taken  care  of.  In  case  of  failure  to  till  oul  the  check  stub  when  a  check  is 
given  out,  unnecessary  trouble  is  caused.  It  may  be  necesary  to  wait  until 
the  canceled  checks  are  returned  from  the  bank  before  the  proper  record  can 
be  made.  Fill  out  the  check  stub  first,  and  then  write  the  check.  Re  sure  to 
enter  each  deposit  on  the  check  stub,  and  bring  down  the  balance  every  time 
a  deposit  is  made  or  a  check  is  written.  It  is  a  great  satisfaction  to  know  the 
balance  in  the  bank  at  any  date  and  to  know  it  is  right.  The  following  illus- 
tration will  show  how  your  cheek  stubs  should  appear: 


No..   / 


'Deposit  _  I  <y  s^y/ 

Favor  C£c^J^.C.  I 


For 


*y, 


cy^^-^^jr 


Balance 

No.     7- 


'Deposit 


<?S0O 


-h  19. 


Fact 


r/CWr/^A^ZVW- 


'Deposit 


^Z,±^LZ'9>_ 


U. 


Favor  (Qrv^r^-C^^. 


Balance  . 


No.  _±£ 0t*tr3£r4L 

'Be  pos  it 


77"/ 


!■>. 


Favor  AJ^7^C^//i^ff^  ( Jt'A 
For  ^/^-7^^-^Jr^J 


Balance 
Nq._JL 


'Deposit 


.'.'- 


■stZ^ifJL 


192-  . 


FavorUu^tiJLii 

fo,6Ll^7/ 


Balance 

No._Cz_ 


Deposit  J/a#?/  <y  /f-2  , 


Favor  11    <Z-^J^U. 


Csf&^,^s^-ir<Jy 


Balance 


JJ\ 


6/J-/JJ 


/JT(,Z3 


f,O0> 


/?w 


jrt-t'J*- 


y/v 


:..-,       ' 


22 


16 

■: 


I  LUSTRATION  NO.    17.     CHEI  K   STUBS,   SHOWING   HANK    BALANCE 


BOOKKEEPING  AND  ACCOUNTING 


s:; 


63J.  Deposit  Ticket:  A  Deposit  Ticket  is  a  list  of  the  items,  such  as  cur- 
rency, checks,  bank  drafts,  (cash  items)  to  be  deposited  in  the  bank.  Deposit 
tickets  are  furnished  by  the  bank  to  its  depositors. 


DEPOSIT  SLIP 

Merchant's  Bank 


T9 


..' 


i£ 


DEPOSITED  BY 


:k222^z 


-i?-rts 


ALL  CHECKS   MUIT   II   LISTED  SEPARATELY 


■ 


£A 


ILLUSTRATION    NO.   48.      DEPOSIT   TICKET 


DEPOSIT  SLIP 

Merchant's  Bank 


.'■ 


•'.--- 


;■ 


;- 


i. 


u. 


5L2S 


IAAJ 


ILLUSTRATION    NO.    49.      DEPOSIT   TICKET 


63K.  Bank  Pass  Book:  This  book  is  a  record  of  deposits  in  the  bank.  Each 
deposit  is  entered  in  this  book  by  the  Bank  Teller  at  the  time  the  deposit  is 
made.  In  actual  business,  the  depositor  makes  no  entry  in  this  book.  The 
bank  enters  the  deposits  and  either  balances  this  book  by  entering  on  the  right 
hand  side  all  checks  paid  by  the  bank,  and  shows  the  balance,  or,  in  large 


%2<S 


jZ 


&Wt 


gt^ru  / 


& 


o 


/- 


/t^e?---C-t2-7-2--C^V 


/ff- 


*Z 


.. 


Qz^^ 


C ^«.«-^fe/ 


"7 


a 


ft,3¥t 


/■SSC 

/■5C 


■7 
J  f  v  J 

2*- 


'/.}<?¥?  2 


2J> 


vyCo 


-+-■-'- 


LEFT  SIDE   OF   PASS  BOOK  RIGHT-HAND   SIDE    OF  PASS   BOOK 

ILLUSTRATION    NO.    50.      THE    BANK    PASS    BOOK 


81 


BOOKKKKI'INC  AND  ACCOUNTING 


banks  the  bank   will  outer  only  deposits  in  the   pass  book   anil  then  on  tho 
first   of  each  month  give  the  depositor  a  separate  statement  showing  both 
deposits  and  eliecks  paid  which  are  canceled  and  returned  to  the  depi 
with  the  statement  or  with  th(  book,  wh  method  is  used.     Eere 

yon  will  enter  all  deposits  on  the  left  side  of  the  pass  book  and  all  i ■•■ 
paid  out  on  the  right-hand  side.    The  i  two  sides  will 

show  the  balance  of  cash  in  the  bank,  as  shown  by  the  balance  on  the  check 
stub,  if  all  checks  issued  have  been  paid  by  the  bank. 

Of  course,  in  actual  work  there  might  be  checks  given  out  that  had  not 
reached  the  bank.  In  that  case,  when  thi  statement  and  canceled  checl 
returned  from  the  bank,  the  checks  given  out  and  nol  paid  would  be  deducted 
from  the  balance  shown  by  the  bank  to  equal  the  balance  shown  on  the  check 
stub  and  Cash  Book.  The  following  is  the  form  of  the  bass  Book.  Deposits 
on  tin   Left     <  I ks  given  out  and  paid  by  the  bank-  on  the  right. 

This  Pass  Book  is  balanced  on  January  6,  just  to  show  how  to  balance  it. 
The  Pass  Book  is  balanced  by  the  hank,  unless  statements  are  rendered  instead. 
but  not  until  the  end  of  the  month,  and  if  the  page  is  filled  when  the  book  is 
balanced,  the  balance  is  carried  to  the  next  left-hand  page,  instead  of  being 
brought  down  below  the  ruling. 

63L.  Bank  Statement:     [f  the  bank  gives  out  statements  instead  of  balanc- 
ing the   Pass   Book,  then  only  the  deposits  would  be  entered   in  the   Pass 
h\    the  Teller  at  the  time  the  deposit  is  made,  and  the  first   of  each  month  a 
statement  like  the  following   is  given  each  depositor  for  the  checks  paid  the 
preceding  month. 

Month  of  January 


192 

Checks 

192 

Checks 

192 

Deposits 

Jan  2 

812.00 

Jan  15 

122.45 

Jan  1 

9500.00 

2 

117.25 

16 

676.69 

6 

1694.22 

2 

863.40 

18 

87.50 

10 

4987.50 

2 

1550.00 

19 

312.85 

13 

2610-93 

3 

156.25 

20 

911-65 

20 

5129.28 

6 

444.60 

20 

664.97 

31 

3562.50 

8 

150-00 

20 

577.68 

8 

38.75 

20 

444.60 

9 

219.86 

22 

1000.00 

10 

647.50 

23 

54.35 

11 

42.85 

23 

727.74 

11 

2992.50 

25 

1517.50 

12 

32.50 

27 

444.60 

12 

150.00 

30 

167.50 

13 

444.60 

13 

240.00 

Balance   $11031.29 

Please  examine  thi                 it  and  the  canceled  vouchers  returned.    Ef  no  error  is  reported 
in  10  davs  the  account  will  bi sidered  correct. 

ILLUSTRATION    NO.    51.     BANK    STATEMENT 


The  I'.ank  Statement  is  the  same  as  if  the  Bank  bass  Book  were  balanced 
and  handed  back  to  the  depositor.  So  many  fail  to  hand  in  their  bass  Books 
at  the  proper  time  to  be  balanced,  that  it  is  better  for  the  Hank  to  render 
statements  at   the  tirst  of  each  month  and  not  balance  the  Pass  Hooks. 


BOOKKEEPING  AND  ACCOCXTING  85 

63M.  Reconciliation  of  Cash  Balance:  The  bank  statement  and  returned 
vouchers  for  the  month  of  Decemher,  were  received  by  T.  M.  James  &  Co.  on 
January  3,  showing  their  balance  at  the  close  of  business  December  31, 
$3,648.75.  Upon  checking  the  returned  vouchers  with  the  Check  Book,  it  was 
found  that  the  following  cheeks  given  out  had  not  reached  the  bank  and  are 
yet  outstanding:  No.  527,  $75.60,  No.  532,  $87.50,  No.  534,  $18.75.  Their  Cash 
Book  shows  a  cash  balance  of  $3,466.90.    Reconcile  the  bank  account. 

Reconciliation: 

Bank    balance    De.-.    31 $3,648.75 

Cash  balance  per  Cash  Book,  Dec.   :il 3,466.90 

Difference     $    181.85 

Checks  Outstanding: 

No.  527    $75.60 

No.  532    S7.50 

No.  534 1S.75 

Cheeks  outstanding,  not  paid  $    181.85 

The  above  form  of  reconcilation  should  be  written  at  the  bottom  of  the  debit 
page  of  the  Cash  Book  at  the  end  of  each  month.  The  bookkeeper  should  show 
the  management  the  deposit  of  the  previous  day,  and  the  cash  balance.  This 
should  be  submitted  every  morning.  Schedules  showing  Notes  Receivable  and 
Accounts  Receivable  soon  to  become  due,  and  those  past  due,  should  be  sub- 
mitted as  often  as  necessary,  also  schedules  of  Notes  Payable  soon  to  become 
due,  and  Accounts  Payable  with  date  of  discount  period  and  the  date  to  be- 
come due. 

63N.  Keeping  the  Bank  Account:  While  the  bank  keep?  the  record  of  all 
transactions  with  its  depositors  and  renders  a  statement  to  each  depositor,  at 
the  end  of  each  month,  or  balances  the  depositor's  Bank  Pass  Book,  yet  each 
depositor  should  keep  a  record.  Usually  the  bank  account  is  kept  on  the 
cheek  stubs  of  the  Check  Book,  but  there  are  various  ways  of  keeping  the  record 
of  transactions  with  the  bank.  A  Bank  column  may  be  kept  in  the  easli  book. 
The  Bank  column  on  the  debit  side  of  the  Cash  Book  will  show  the  deposits 
from  time  to  time,  and  the  Bank  Column  on  the  Credit  side  of  the  Cash  Book 
will  show  the  cheeks  issued.  The  difference  between  the  totals  of  the  Bank 
columns  will  prove  with  the  Cash  balance,  at  any  time.  Duplicate  copies  of 
the  deposit  tickets  may  be  kept,  ami  these  will  be  a  very  convenient  reference 
in  some  line  of  business.  If  duplicates  of  the  deposit  tickets  are  not  kept,  a 
list  of  each  deposit  may  be  kept  on  the  back  of  the  check  stubs. 


85 


BOOKKEEPING  AND  ACCOUNTING 


PROBLEM  9.     W.  G.  GEAYSON  &  CO.     A  PARTNERSHIP 

The  purpose  of  this  problem  is  to  give  further  practice  in  making  adjust- 
ments and  closing  the  books.     Points  will  arise  in  the  course  of  the  soli 
which  may  be  discussed  in  class. 

The  following  accounts   represent   the  totals  of  the  Ledger  accounts 
W.  G.  Grayson  &  Co.  a1  the  end  of  a  six  months'  period,  from  January  1  to 
June  30.    W.  G.  Grayson  and  W.  B.  Rollins  an-  partners,  and  share  profits  and 
hear  losses  in  proportion  to  their  investments. 

Trading  Accounts 
Merchandise  Inventory 


w 

'  I    ( }raj  son,  Capital 

May  10 

K .00      Jan.  1        9000.00 

W. 

G.  Grayson,  Personal 

Mar.  1 

-  i.00  !   Apr.  5           15.25 

Y\ 

r.  B.  Rollins,  Capital 

|  Jan.  1        6000.00 

AY 

.  B.  Rollins,  Personal 

.Mar.  20 

.;  -no  | 

Cash 

June  30 

871 0.2.3  | 

Notes  Receivable 

June  30 

7748.00  |  June  30     L800.00 

Notes  Payable 

|  June  30    4980.00 

W.  11.  Strong 

June  30 

2407.25 

E.  L.  Morton 

June  30 

2137.35  | 

Davis  Bros. 

|  June  30    2154.20 

A.  C.  McClurg  &  Co. 

June  30    1985.40 

Office   Equipment 

June  30 

985.20  | 

1  tclivcrv  Equipmenl 

June  30     L26  i  30 


•Jan.  1 

4865.70  j 
Purchases 

•June  30 

18531.30  |  Jui 
Purchases  Discount 

U6.20 

|  June  30 

347  80 

Sales 

June  30 

429.75  |  June  30 
Sales  Discount 

24597.25 

June  30 

542.50 
Freight  In 

June  30      478.20  , 

Profit  and  Loss  Accounts 
Administrative  Bxpi  QS( 


June  30 

754.05  |  June  30 
Selling  Expense 

8.75 

June  30 

850.25      June  30 
Delivery  Expense 

12  7:, 

June  30 

324.45  | 

Insurance 

June  30 

125.00  | 

Interest  and  Discount 

June  30 


37.12      June  30 


Copy  the  above  accounts  on   Ledger  paper,  allowing   each  account   eighl 
linos,  and  after  making  journal  entries  to  adjust   the  following  inventories, 


BOOKKEEPING  AND  ACCOUNTING  87 

prepare  a  Final  Trial  Balance  before  closing,  from  which  prepare  a  Balance 
Sheet  and  a  Profit  and  Loss  Statement,  then  prepare  and  post  journal  entries 
to  "Close  the  Ledger."    See  paragraphs  28  to  41. 

Merchandise   Inventory,  June   30    $6,265.80 

Insurance   Expired    62.50 

Accrued  Assets : 

Interest  on  Notes  Receivable 125.50 

Accrued  Liabilities: 

Unpaid  Office  help    185.40 

Unpaid  payroll  Sales  Department    137.50 

Interest  accrued  on  Notes  Payable 22.50 

Deferred  Charges  to  Operation  : 

Postage  and  Office  Supplies  on  hand   75.60 

Advertising  matter  on  hand 115.35 

Depreciation : 

10%   on  Office  Equipment 98.52 

15%  on  Delivery  Equipment 189.87 

Reserve  for  Doubtful  Accounts : 

6%  of  Accounts  Receivable   272.68 

First,  take  a  Trial  Balance  by  differences,  except  in  Purchases  and  Sales 
account,  in  which  use  both  the  debit  and  credit  amounts,  because  the  credit  of 
Purchases  represents  the  returns  from  Purchases,  and  the  allowances  received 
from  creditors,  and  the  debit  of  Sales  represents  the  returns  from  sales  and 
the  allowances  to  customers,  and  these  items  are  used  in  the  Profit  and  Loss 
Statement.  Second,  prepare  and  post  adjustment  journal  entries  to  record 
the  above  inventories  in  the  hooks  except  the  Merchandise  Inventory.  Third, 
take  a  Final  Trial  Balance.  Fourth,  prepare  a  Balance  Sheet  and  Profit  and 
Loss  Statement  and  prove  them.  Fifth,  prepare  and  post  closing  journal 
entries  to  close  the  Nominal  -accounts. 

The  student  is  instructed  to  close  the  Partners'  Personal  accounts  into 
their  Capital  accounts,  and  to  credit  each  partner  for  his  proportion  of  the 
net  profit.  Read  Partnership  Accounting,  paragraphs  82  and  83.  Prepare 
and  post  journal  entries  to  make  this  adjustment.  Rule  and  foot  the 
accounts  that  are  closed.  Prepare  and  post  journal  entries  to  close  Accrued 
Assets,  Accrued  Liabilities  and  Deferred  Charges  to  Operation  accounts, 
and  transfer  these  items  back  to  the  accounts  they  affect.  See  paragraph  40. 
Rule  and  foot  these  three  accounts  that  are  closed.  Take  a  proof  Trial 
Balance. 

Note:  A  Working  Sheet  similar  to  illustration  No.  43  may  be  used  or  the 
steps  may  be  taken  as  suggested  above. 


>> 


BOOKKEEPING   AND  AC<  01  NTING 


THE   BALANCE   SHEET   AND   TRIAL   BALANCE 

When   the   posting   of  the   I ks  is  completed,   we   know    thai   if  the 

posting  lias  been  done  correctly,  the  Trial  Balance  must  balance.  The  Trial 
Balance  is  the  uexl  step  after  posting  a1  the  end  of  the  month,  and  at  the  end 
ui'    any    fiscal    period. 

The  fad   that  the  Trial  Balance  balances  proves  thai   the  debits  have  all 

been   posted  to  the  debit   side  of  the   Led(  units,  and  that   the  credits 

all   been   posted  to  the  credil   side  of  the   Ledger  arc. units,  yet,  there 

could  still  be  a  mistake,  for  a  debil   item  could  be  posted  to  the  debit   side 

of  the  wrong  account.     A  debit  of  $350  to  Davis  Bros,  mighl   be 

the  debit  of  Harper  Bros,  i int,  and  the  Trial  Balance  would  balance,  bu1 

any  error  of  this  kind  will  be  found  while  making  oul  monthly  state 
in  customers,  or  in  receiving  monthly  statements  from  creditors  which,  of 
course,  are  compared  with  their  accounts  in  your  books  before  payment. 
So  the  bookkeeper  does  uol  borrow  trouble  over  the  possibility  of  such  an 
error,  because  he  knows  if  there  is  such  an  error,  it  will  be  discovered  as 
jusl    -       ested,   and   can   be   corrected   without   affecting   the   Trial    Balance. 

65.  Balance  Sheet.     A   Balance  Sheel  is  a  statement  of  the  Resources  and 
Liabilities   or    Assets   and    Liabilities,   and   Capital   accounts   arranged    in   a 

proper  form  to  show  clearlj   thi ndition  of  the  business.     The  total  of  the 

assets  minus  the  total  of  the  liabilities  is  the  net  capital,  yel  simply  a  list 
of  the  assets  and  a  list  of  the  liabilities  promiscuously  arranged,  while  il 
mighl  be  a  eorreel  statement  of  assets  and  liabilities,  is  nol  a  satisfactory 
Balance  sheet. 

Suppose  you  were  seeking  an  opening  to  conned  yourself  with  a   - 
business  and   had   opportunities  offered  you   to  become  an  equal   partner  in 
the  business  of  -1111111  T.  Long,  or  in  the  business  of  C.  M.  Senter,  both  in  the 
same  line  of  business,  the  location  and  the  persons  being  equally  satisfactory 


Balance  Sheet.  John 

T .  Ion/:  • 

Assets: 

Liabilities: 

Merchandise 

2000 

00 

Real  Estate 

10500 

00 

Notes  Payable 

6875 

00 

Cash 

1500 

00 

Aooounts  Fayable 

9875 

00 

Office  Stationery  on  hand 

275 

00 

Mortgage  Payable 

4500 

00 

Advertising  Matter  on  hand 

225 

00 

Accounts  Receivable 

2000 

00 

John  T.  Long, Capital 

7500 

00 

Office  Fixtures 

1500 

00 

Machinery 

12750 

00 

Total  Assets 

30750 

00 

30750 

00 

Balance  Sheet,  C 

.  M. 

Senter. 

Assets. 

Liabilities: 

Aooounts  Reoeivable 

4250 

00 

Machinery 

4250 

00 

llotes  Payable 

4750 

00 

Real  Estate 

7000 

00 

Aooounts  Payable 

9500 

00 

Cash 

5000 

00 

Mortgage  Payable 

600q 

00 

Offioe  Supplies  on  hand 

125 

00 

Salaries  advanced 

to  salesmen 

50 

00 

C-  M.  Senter .Capital 

750C 

03 

Advertising  Matter  on  hand 

75 

00 

Merchandise 

1550 

00 

Offioe  Equipment 

700 

00 

Notes  Reoeivable 

4750 

OP 

Total  Assets 

27750 

00 

27750 

00 

lit  1  sri:  \TION  NO. 


MEETS. 


BOOKKHKlMXt;   AND  ACCOUNTING 


89 


in  each  case,  and  the  Balance  Sheets,  [llustration  No.  52,  were  presented  i  i  you, 
upon  which  you  propose  to  make  your  decision,  which  would  be  your  choia 

tin.  Assuming  the  Balance  sheet  in  each  ease  is  correct  as  to  the  Assets 
and  Liabilities,  the  net  capital  in  each  ease  is  the  same,  $7,500.  You  can 
invest  $7,500  in  either  business  and  own  a  half  interest.  Looking  at  these 
statements  as  they  are,  it  is  not  easy  to  see  which  is  the  better  investment. 
It  would  be  necessary  to  arrange  the  Assets  and  Liabilities  to  show  the  obli 
gations  soon  to  be  paid  and  the  quick  assets  thai  would  be  available  to  meet 
these  obligations. 

(17.  Current  Assets  (or  quick  assets  or  liquid  assets)  are  those  which 
may  soon  be  turned  into  cash  to  pay  the  debts  soon  to  become  due.  Deferred 
Assets  are  office  supplies  on  hand,  advertising  matter  on  hand,  paid  for  bu1 
not  used  up.  and  any  salaries  or  other  expenses  paid  in  advance  that  would 
represent  service  due  the  business.  Fixed  assets  (those  more  permanent 
•and  not  available  for  the  payment  of  debts;  are  such  as  Machinery,  office 
equipment,  buildings,  real  estate,  good  will,  etc.  Of  the  Fixed  or  Permanent 
assets.  Good  Will  is  the  most  permanent,  because  the  business  would  have 
to  be  sold  to  convert  Good  Will  into  cash.  However,  to  convert  the  machin 
erj  or  buildings  into  cash  would  cause  the  discontinuance  of  the  business 
il'  the  money  had  to  be  applied  on  debts.  Current  Liabilities  are  those  debts 
soon  to  become  due.  and  Fixed  Liabilities  are  those  longer  deferred,  as  a 
mortgage  due  in  three  years.  Arrange  the  foregoing  Balance  Sheets  as  I'm  I 
lows  and  examine  them. 


Balance 

Sheet . 

John  T.  Long. 

Current  Assets: 
Cash 

Aooounts  Reoeivable 
Mdse.  Inventory 

1500 
2000 
2000 

00 
00 
QQ 

5500 
500 

00 

00 

Current  Liabilities] 
Notes  Payable 
Acoounts  Payable 

Total  Current 

Liabilities 

Fixed  Liabilities: 
Mortgage  Payable 

John  T-  Long, 

Capital, 

3675 
9875 

00 

OQ 

16750 
4500 
7500 

00 
00 
00 

Total  Current  Assets 

Deferred  Assets: 
Office  Supplies 
Adv.  Matter 

275 
225 

00 

00 

Total  Deferred  Assets 

Fixed  Assets. 
Offioe  Fixtures 
Real  Estate 
Maohinery 

1500 
10500 
12750 

00 
00 

bo 

30750 

00 

Total  Fixed  Assets 

24750 

oc 

Total  Assets 

30750 

00 

f 

B_alsnc_e_  Sheet .  C  K.  Se_nte_r 


Current  Assets: 
Cash 

Botes  Reoeivable 
Acoounts  Reoeivable 
Mdse.  Inventory 

Total  Current  Assets 

Deferred  Assets: 
Offioe  Supplies 
Advertising  Matter 
Advanoed  Salaries 

Total  Deferred  Assets 

Fixed  Assets: 

Offioe  Equipment 
Real  Estate 
Maohinery 
Total  Fixed  Assets 
Total  Assets 


5000 
4750 
4250 
1F5C 


125 
75 
50 


700 
7000 
4250 


15550 


250 


1195C  00 


27750  00 


OC 


00 


Current  Liabilities 
Notes  Payable 
Aooounts  Payable 

Total  Current 

Liabilities 

Fixed  Liabilities: 
Mortgage  payable 

C.  M.  Senter, 

Capital 


4750 
9500 


14250 

6000 
7500 


27750 


r 


CO 


ILLUSTRATION    NO.    63.      BALANCE    SHEETS 


90  BOOKKEEPING  AM'  ACCOUNTING 

68  Examining  the  Balance  Sheets  in  the  forms  shown  lasl  above,  you  find 
thai  -Inliii  T.  Long  lias  eurrenl  or  available  assets  of  $5,500  with  which  to 
ni.it  $18,750  of  eurrenl  Liabilities  soon  to  become  due,  and  it'  you  put  in 
-^ 7 ,-">i  h  •  for  a  half-interest,  you  would  yet  lack  $5,750  of  being  able  1"  meet  the 
eurrenl  debts. 

You  find  thai  C.  M.  Senter  lias  eurrenl  or  quick  assets  of  $15,550  to  meel 
eurrenl  debts  of  $14,250,  and  it'  you  pul  in  $7,500  for  a  half  interest,  the 
eurrenl  debts  eould  all  be  paid  and  there  would  be  a  balance  for  working 
capital  of  $8,800,  in  cash  and  available  assets,  which  is  very  good  for  a  small 
concern. 

Gli.  The  purpose  of  the  Balance  Sheel  is  not  only  to  list  the  assets  and 
liabilities  to  ascertain  the  net  eapital.  hut  to  segregate  the  various  items  so 
as  to  give  the  maximum  of  information  to  make  clear  the  condition  of  the 
business.  The  foregoing  illustrations  will  emphasize  the  importance  of  the 
Balance  Sheel  in  one  respect,  hut  the  Balance  Sheet  is  one  of  the  most 
important  papers  or  exhibits  of  the  results  of  the  bookkeeping,  and  of  vital 
interest    to: 

1.  The  Manager  3.  The  Owner  or  Stockholder 

l\  The  Banker  or  Creditor  I.  The  Investor 

If  properly  prepared,  it  reveals  the  condition  of  the  business  and  should 
l>e  studied  by  the  owner  or  stockholder  to  whom  it  is  as  important  as  the 
l'rolit  and  Loss  Statement.  The  investor  should  study  and  understand  it, 
ami  the  hanks  will  he  especially  interested  in  it.  when  considering  a  loan. 

69a.  The  foregoing  Balance  Sheets  of  John  T.  Long  and  ('.  SI.  Senter 
show  the  order  in  which  the  assets  and  liabilities  are  usually  arranged.  The 
assets  are  arranged  in  the  order  of  their  importance  as  to  their  being  available 
to  obtain  the  money  to  pay  dohts  soon  to  become  due.  The  liabilities  are 
arranged  in  the  order  of  their  importance  as  to  requiring  attention  by  pay- 
ment. In  a  partnership,  the  form  is  the  same,  but  the  present  net  capital  of 
each  partner  is  arranged  on  the  liability  side  in  the  position  of  C.  M.  Senter 
in  the  last  illustration.  For  instance,  if  ('.  M.  Senter  and  J.  M.  Jones  were 
partners  and  the  capital  of  each  were  $3,750,  the  Balance  Sheet    would  show 

C.  M.  Senter,  Present  Capital.  *:l,750 
J,  M.  Jones,    Present  Capital.    3,750 

instead  of,  or  in  the  place  of  C.  M.  Senter.  Capital.  $7,500.     The  result  would 
be  the  .same  as  if  there  were  only  one  proprietor. 


CHAPTER  V 
W.  J.  EMERSON  &  CO.,  WHOLESALE 

A  Partnership 

70.  This  business  is  a  continuation  of  the  business  of  W.  J.  Emerson  ending 
January  31,  192  ,  Chapter  III,  he  having'  admitted  W.  II.  Whitaker  as  an 
equal  partner,  in  order  to  enlarge  the  business.  The  business  is  conducted 
under  the  name  of  W.  J.  Emerson  &  Co.  It  is  designed  for  the  business  papers 
to  be  used,  beginning  in  the  Incoming  Papers  Tab,  where  the  work  ended  on 
January  31,  but  the  results  will  be  exactly  the  same  whether  the  business 
papers  are  used  or  not. 

The  books  to  be  used  are  the  Cash  Book,  Purchases  Book,  Sales  Book. 
Journal,  Ledger,  Notes  Receivable  and  Notes  Payable  Book,  and  the  Check 
Book,  Bank  Pass  Book  and  the  Incoming  Papers  Tab.  The  Ledger  accounts 
as  they  are  in  the  Ledger,  after  closing  the  .books  of  W.  J.  Emerson  on  Jan- 
uary 31,  stand  ready  to  receive  this  business.  New  accounts  are  to  be  opened 
as  needed.  References  lb,  2b,  3b,  etc.,  refer  to  entries  for  similar  transactions 
in  the  preceding  set.  References  la,  10a,  etc.,  refer  to  similar  transactions 
in  Chapter  II. 

71.  Opening  the  Books:  The  admission  of  a  partner  requires  the  same 
steps,  in  a  general  way,  as  the  forming  of  a  new  partnership.  In  fact,  it  is  a 
new  partnership.  The  Articles  of  Copartnership,  usually  the  work  of  a  lawyer, 
should  be  signed,  executed  and  filed  with  the  Balance  Sheet  as  of  January  31, 
attached.  Read  "Partnership  Accounting"  beginning  at  page  104.  The 
opening  entry  should  state  the  essential  facts,  so  that  any  one  taking 
charge  of  the  books  may  have  the  necessary  information  at  hand.  The  details 
of  the  partnership  agreement,  Articles  of  Copartnership,  are  omitted  from  the 
opening  entry  because  it  is  not  desirable  that  those  who  may  have  access  to 
the  books  should  know  the  private  affairs  of  the  firm. 

72.  Preliminary:  "Write  your  name  on  the  outside  cover  of  the  books  to 
be  used,  and  page  the  Cash  Book,  Purchases  Book  and  Sales  Book.  Write  the 
headings  of  the  columns  in  the  Cash  Book,  the  same  as  the  Cash  Book  in  the 
preceding  business.  Turn  to  the  Incoming  Papers  Tab  for  the  papers  for 
Transaction  No.  76,  and  prepare  the  opening  entry  on  the  next  blank  page  of 
the  Journal.  As  the  assets  and  liabilities  representing  W.  J.  Emerson's  Cap- 
ital, or  net  investment,  are  already  in  the  Ledger,  it  is  not  necessary  to  list 
them  in  the  Journal.  State  the  facts  in  the  opening  entry,  writing  them  as 
worded  in  No.  76. 

As  the  investment  of  W.  J.  Emerson  is  represented  by  the  Ledger  Ac- 
counts as  they  appear  in  the  Ledger,  at  the  end  of  January,  in  Chapter  III, 
it  is  not  necessary  to  make  any  entry  in  the  Journal  for  W.  J.  Emerson  in 
this  opening  entry.  The  Balance  Sheet  at  the  end  of  January  shows  Mr. 
Emerson's  investment.  Mr.  Whitaker  accepts  this  statement  as  correct.  The 
assets  and  liabilities  of  Mr.  Emerson  are  already  in  the  Ledger,  and  the 
same  books  are  to  be  continued.  Therefore,  only  one  entry,  for  W.  II. 
Whitaker's  investment,  is  necessary  in  this  opening  entry.  In  this  case,  the 
partners  are  to  invest  equal  amounts,  and  the  articles  of  agreement  state  that 
they  are  to  share  profits  and  bear  losses  equally,  but  if  there  was  nothing  said 
in  the  agreement  about  the  division  of  profits,  then,  no  matter  what  amount 
Mr.  Whitaker  might  invest,  the  profits  would  be  divided  equally.  Hence,  the 
importance  of  having  the  division  of  profits  specified  in  the  agreement. 

91 


92 


BOOKKEEPING  AND  AC<  OUNTING 


BUSINESS  TRANSACTIONS 

No.  7(i.      Feb.  I.     W.J.  Emerson  has  this  day  admitted  \V.  II.  Whitaker  as  an 
al  partner,  according  to  the  Articles  of  Copartnership,  signed   ex 

ecuted  and  filed,  in  i tinue  the  business  of  W.  -I.  Emerson,  under 

the  tii-iii  name  of  W.  -1.  Emerson  iv.  Co.    The  partners  are  to  invesl 
equal  amounts,  and  are  to  share  profits  and  bear  losses  equally,  and 
eh  is  to  receive  a  salary  of  $250  a  month. 

\V.  J.  Emerson's  investment  is  represented  bj  the  book  accounts, 
as  shown  by  the  Balance  Sheet  of  January  31,  192  .  which  W.  II.  Whitaker 
accepts. 

W.  II.  Whitaker  inw^  cash  $4,096.37,  ami  the  two  story  building  and  lot 
a1    Main  and  South  Sts.,  now   occupied   by  the  store,  at   an  agreed  value  of 


$16,000  for  tlie  building  and  ^L'.oiiii  for  the  land,  on  which   is  a  mort gage  of 

for  three  years,  which   the   business 


$6,000  at   .;■,    dated    February   1.   192 

assumes. 


(  ash 
Buildin  g 

Land 

Mortgage  Payable 
W.  II.  Whitaker,  Capital 
Investment  as  per  agreement. 


1096 
2500 


::7 
mi 

oil 


: 


00 
37 


Check  the  cash  item  in  this  opening  entry  for  W.  II.  Whitaker.  and  enter  the 
amount  on  the  firsl  line  of  the  debit  side  of  tin-  Cash  Hook.  "\Y.  II.  Whitaker, 
Investment,  $4,096.37"  in  the  General  column  and  check  this  item  in  the  Cash 

Transfer  the  old  cash  balance  of  the  Cash  accounl   to  the  dehil   side  of  the 
Cash  Book,  "W.  -I.  Emerson,  Investment, "  and  enter  the  amount  in  the  Gen 
era!  column  and  check  it  to  show-  it  is  not  to  lie  posted,    clove  the  old  Cash 
account,  at   the  same  time,  by  entering  the  same  amount  on  the  credil   side 
■to  close." 


$132.35  for  office  stationery  and 
Co.    $43.25     f"!     oil     and     lms.. 


No    77.      Feb.  2.     Paid  Brown  Stationery  Co. 
supplies.    (3b).     Paid    Sinclair   Oil 

line.   (17b). 

Xo.  78.      Feb.  2.     Sold  to  Smith  &  Jones  l'  10,  □  60,  65*  brls    Geneva  Flour 
-mi.  85  cs.     Royal  Sweel  Corn  <g  $4.35.    Sold  to  Harper  Bros., 

Detroit,  Mich.,  2  30,  n  tin.  7:.  bx.  12  lb.  Chocolate  (g   $6.55,  7:.  brls. 

I  rarvester  Apples  (5  - 1.25. 

These  are  delivered  prices.     Prepaid  freighl  to  B.  &  o.  R.  R.  Co 

^rio.7."i    on    hill    to    Smitli     \    Jones,    and    $61.35    on    hill    to    Harper 

Bros.     (35b  . 
Xo.  70.      Feb.  ■'!.     Purchased  of  Seaman  Grocer  Co.  merchandise  as  per  I, 

No.  li'.  :!  15,  n  tin,  $987.60.     Purchased  of  Weston  Tea  &  Coffee  I  o 

St.    Louis,    Mo.,    merchandise    as   per   Invoice   Xo.    13,   ■'•  15, 

$1,134.25.     Purchased  of  J.  II.  Morgan  Grocer  Co.,  Cincinnati,  Ohio. 

merchandise  as  per  Invoice  No.  l  t. :;  15,  n  60,  $896.74.     (4b  and  12b 
No.  80.      Keh.  ::.     Gave  Rush   Printing  Co.  a  check  for  $165.75  for  printing 

advertising  booklets  and  supplies  for  the  sales  department.     (71 
No    81.      Feb.  3.     Received  a  30  day  trade  acceptance  for  $793  80  from  Harper 

Bros,  and  allowed  '-"  ,   discount  on  hill  of  Feb.  2,  $810.     (See  14a). 

Received  $863.62   from  Smith  &   Jones,  to  pay  their  hills  id'  .Ian.    17. 

}!881.25  in  full,  allowing  23   discount.     (9b  . 


Xo.  84. 

Feb.  4 

No.  85. 

Feb.  5. 

(32b). 

ruary  : 

No.  86. 

Feb.  5 

BOOKKEEPIXG  AND  ACCOUNTING  93 

No.  82.      Feb.  3.    Received  $524.30  for  sundry  cash  sales.     (5b). 

No.  83.  Feb.  4.  Paid  R.  K.  Miller  &  Co;  $1,407.71,  which  pays  balance  of 
Invoice  No.  7.  $1,451.25,  in  full,  deducting  3'/i  discount.  (15b). 
Paid  See-Moon  &  Co.  $1,790.47  in  full  for  balance  of  invoice  Jan.  19, 
$1,845.85,  deducting  3%  discount.  (15b).  Paid  Atlas  Trading  Co. 
$1,451.94  in  full  for  Invoice  of  Jan.  19,  $1,496.85,  deducting  3',  dis- 
count.    (15b). 

Received  $623.90  for  sundry  cash  sales.     (5b). 

Paid  B.  &  0.  R.  R.  Co.  $131.25  for  freight  on  goods  purchased. 
Allowed  Smith  &  Jones  $28.75  for  shortage  on  bill  of  Feb- 
.     (lib). 

Sold  to  J.  M.  Bryant  &  Co.,  Akron,  Ohio,  2/30,  n/60,  75  bx. 
12  lb.  Chocolate  @  $6.55,  o0  cs.     R.  Sweet  Corn  @  $4.35. 

Sold  to  A.  C.  Williams  &  Co.,  Peoria,  111.,  2/30,  n/60,  75  bx.  Silver 
Prunes  @  $4.25,  50  cs.    Glucose  Syrup  @  $4.15. 

Sold  to  A.  H.  Mold  &  Co.,  Lansing,  Mich..  2/30,  n/60,  60  brls. 
G.  Flour  @  $7.85,  75  bskts.  W.  Peaches  @  $2.25. 

Sold  to  Harper  Bros.  2/30,  n/60,  55  brls.  H.  Apples  @  $4.25.  50 
brls.  Early  Potatoes  @  $4.25.    (6b). 

Xo.  87.  Feb.  5.  Received  $881.02  from  D.  M.  Noe  &  Co.,  on  account  and 
allowed  2\  discount  on  balance  of  $899.  (9b).  Received  $585.70 
for  sundry  cash  sales.     (5b). 

Xo.  88.  Feb.  5.  Received  an  allowance  of  $37.85  from  Weston  Tea  &  Coffee 
Co.  for  shortage  on  Invoice  of  Feb.  3.  Returned  goods  to  the  value 
of  $68.75  to  J.  II.  Morgan  Grocer  Co.  from  Invoice  of  Feb.  3,  for 
credit,     (lib). 

Xo.  89.  Feb.  6.  Paid  office  help  for  the  week,  $1S7.50.  Paid  payroll  of  sales 
force  for  t lie  week,  $218.60.  Paid  drivers  of  delivery  trucks, 
$48.75.     (34b). 

Xo.  90.  Feb.  6.  Purchased  of  United  Fruit  Co.,  Pittsburgh,  Pa.,  merchan- 
dise as  per  Invoice  No.  15,  3/30,  n/60,  $1,215.40. 

Purchased  of  R.  K.  Miller  &  Co.,  merchandise  as  per  Invoice 
No.  16,  3  15,  n/60,  $1,225.30. 

Purchased  of  Weston  Tea  &  Coffee  Co.,  merchandise  as  per 
Invoice  Xo.  17,  3  15.  n/60,  $1,195.60. 

Purchased  of  See-Moon  &  Co.,  merchandise  as  per  Invoice  Xo. 
18,  3/15,  n/60,  $947.50.     (4b  and  12b). 

Xo.  91.  Feb.  6.  Paid  Seaman  Grocer  Co.,  $1,162.79,  in  full  for  Invoice  of 
Jan.  23,  $1,198.75,  deducting  •')' ,    discount. 

Paid  Logan,  Bryan  &  Co.  $1,234.18  in  full  for  Invoice  of  Jan.  23, 
$1,272.35,  deducting  3',.'    discount.      (15b). 

Xo.  92.  Feb.  8.  Delivered  to  W.  J.  Emerson  for  private  use :  3  cs.  R.  Sweet 
Corn  Ur  $4.35.  2  bx.  12  lbs.  Chocolate  @  $6.55.  4  cs.  Clucose  Syrup 
@$4.15.    (22b).    W.H.  Whitaker  drew  $125  for  personal  use.    (22b). 

No.  93.  Feb.  8.  Received  $1,153.95  from  W.  II.  Mason  &  Sons  on  account 
and  allowed  2%  discount  on  balance  of  bill  of  Jan.  24,  $1,177.50. 

Received  $923.11.")  from  Dwight  Bros,  on  account  and  allowed 
2%  discount  on  bill  of  Jan.  24.  $942.50. 

Received  $1,018.46  from  Davis  Bros,  on  account,  and  allowed 
2%  discount  on  balance  of  bill  of  Jan.  24.  $1,039.25.     (9b). 


94  BOOKKEEPING  AND  ACCOUNTING 

No.  94.      Feb.  8.     Posl    the   ' ks  to  date,   and   ascertain   tlie  cash   balance. 

Sec  iiisu  uctions  follow  ing   16b. 

No.  95.  Feb.  9.  Paid  Nelson  Contracting  Co.  $750  for  remodeling  the  second 
floor  of  Store  Building  to  be  rented  for  offices.  (Debit  Building 
account  on  the  credil  side  of  the  Cash  Book.  This  is  a  permanent 
improvement  and  represents  an  additional  investment  in  real  estate  . 

No.  96.      Feb.  9.    Paid  Watts  Decorating  Co.  $315.40  for  decorating  r is  ami 

varnishing  floors  of  offices  on  second  floor.  I  Debit  Building  account 
mi  the  credil  side  of  the  Cash  Book.  Usually  this  would  be  debited 
to  Real  Estate  Expense  and  Income,  but  until  the  building  is  read] 
to  be  occupied  every  cosl  is  charged  to  tin'  Building  account,  then 
after  the  building  is  ready  or  is  occupied  such  costs  are  charged  to 
Real  Estate  Expense  and  Income.  This  account  mighl  be  called 
"Building  Expense  and  Income"  it'  preferred. 

No.  97.      Feb.  9.     Received  $612.85  for  sundry  rash  sales.     (5b). 

No.  98.  Feb.  9.  Received  a  30  day  trade  acceptance  for  $694.57,  dated  Feb. 
5.  from  -I.  M.  Bryant  >\-  Co.,  on  account,  and  a  Unwed  l"  ,  discounl  on 
bill  of  Feb.  5,  $708.75.  Received  a  30  day  trade  acceptance  for  $515.72, 
dated  Feb.  5,  from  A.  ( '.  Williams  &  ( !o.,  on  account,  and  allowed  2' , 
discounl  on  bill  of  Feb.  5,  $526.25.  Received  a  30  day  trade  accept- 
ance for  $626.95,  dated  Feb.  5,  Prom  A.  II.  Moh]  &  <  !o.  on  account,  ami 
allowed  _' ;  discount  on  bill  of  Feb  •">.  $639.75.  (Enter  in  Journal 
separately.     Enter  acceptances  in  Notes  Receivable  Book.     When  a 

trade  acceptance  falls  due  within  tie-  dis int   period,  the  discount   is 

allow  I'd  the  same  as  mi  a  cash  payment.     See  9b   . 

No.  00.  Feb.  9.  Sold  to  I).  M.  Noe  ,v  Co..  2  15,  n  30,  ;,iii)  lbs.  Green  Tea  @ 
72c.  loo  bx.  Evap.  Apples  (5  $4.75. 

Sold  to  Davis  Bros.  -1  15,  n  30,  2,000  lbs.  Granulated  Sugar  @ 
12c,   Kill  cs.   Ideal  Tomatoes  (n    $4.75,  50  bx.   A.  A.    Prunes  (n    $5.75. 

Sold  to  Dwight  Bros,  l'  15,  n  30,  100  cs.  '  ,  lb.  G.  Pepper  (g  $5.25, 
600  lbs.  Oolon-  Tea  (a  65c. 

Sol, |  to  W.  II.  Mas,,,,  &  s,,ns  2  15,  n  30,  800  lbs.  M  &  .1  Coffee 

@  58c.      Hid  cs.  Lima  Peans  (,,    $4.35.      (6b). 

No.  Ion.  Feb.  9.  Paid  Auto  Repair  Co  $98.35  For  repairing  delivery  trucks. 
(17b).  Received  $11.25  from  Brown  Stationerj  Co.  as  refund  for 
overcharge  on  bill  of  Feb.  2.  *  ('re, lit  Administrative  expense  on  the 
debit  side  of  the  ('ash  Book).  Received  $13.25  from  Push  Printing 
Co.  as  a  rebate  on  bill  of  Pel,.  :;.     (Credit  Selling  Expense). 

No.  101.    Feb.  10.    Leased  the  second  floor  offices  of  store  building  to  Healy  & 

Frost,  law  firm,  for  one  year  from  this  date  at  $240  a  month,  and  re- 
ceived their  check  for  one  month's  rent,  from  February  1.  (Credit 
Real  Estate  Expense  and  Income  on  t lie  debit  side  of  the  Cash  Book.) 

No.   10l\    Feb.  in.     W.  -I.  Emerson  and  W.  II.  Whitaker  each  withdrew  $2,500 

from  investment,     i  Debit  each  partner's  Capital  account  on  tl relit 

side  of  the  (  ash   Book.     See  33b  !. 

Xo.  103.    Feb.  10.    Ron-owed  $5,000 at  tin-  Central  National  Bank  on  our  15  day 

note  at   6%,   proceeds.  $4,987.50.      (See  23a  and  40b.)      Filter  ill  Notes 

Payable  Book. 


BOOKKEEPING  I  AND  ACCOUNTING  95 

No.  104.  Feb.  10.  Discount  the  following  trade  acceptances  al  the  hank  at 
1%;  Harper  Bros.  30  day  acceptance,  $793.80,  J.  M.  Bryant  &  Co. 
30  day  acceptance,  $694.57,  A.  ('.  Williams  &  Co.,  30  day  acceptance, 
$515,72,  A.  II.  Mold  &  Co.  30  day  acceptance,  $626.95.  Discouni 
$26.31.     Proceeds,  $2,604.73. 

Credit  "Notes  Receivable  Discounted"  on  the  debit  side  of  the 
Cash  Book  for  the  face  value.  $2,631.04.     Debit    Interesl   and    Dis 
count  on  the  credit  side  of  the  ('ash  Book,  $26.31.    Make  the  proper 
record  in  the  Notes  Receivable  Book. 

Contingent  Liability:  The  above  acceptances  have  been  dis- 
counted at  the  bank  and  the  cash  received  for  them  but  in  order  to 
transfer  an  acceptance  or  note  to  the  bank,  we  must  indorse  the 
paper.  This  indorsement  makes  us  responsible  for  the  paper,  if  the 
maker  or  acceptor  does  not  pay  when  due.  so  until  these  papers  are 
due  and  paid  they  are  each  a  possible  liability  of  ours,  because  we 
must  pay  the  bank  if  the  maker  or  acceptor  does  not.  For  this 
reason,  accountants  insist  upon  opening  an  account  for  "Notes 
Receivable  Discounted,"  to  show  the  "Contingent  Liability,"  until 
the  discounted  paper  becomes  due  and  is  paid..  When  the  time  has 
expired  for  the  notes  or  acceptances  to  become  due,  if  the  bank 
does  not  call  upon  us  to  make  any  of  the  paper  good,  this  "Con- 
tingent Liability"  is  removed,  and  the  "Notes  Receivable  Dis- 
counted" account  is  closed,  by  journal  entry,  and  transferred  to 
the  Notes  Receivable  account. 

No.  105.  Feb.  11.  Purchased  of  Atlas  Trading  Co.  merchandise  as  per  Invoice 
No.  19,  3/15,  n/60,  $1,894.25.  Purchased  of  Logan,  Bryan  &  Co.  mer- 
chandise as  per  Invoice  No.  20,  3/15,  n  tilt,  $2,136.40.  Purchased  of 
Seaman  Grocer  Co.  merchandise  as  per  Invoice  No.  21  3/15,  n  60, 
$1,912.30. 

No.  106.    Feb.  11.     Received  $624.35  for  sundry  cash  sales.     (5b). 

No.  107.  Feb.  12.  Sold  to  Johnson  &  Meyer,  Erie,  Pa.,  2/15,  n ,.30,  500  lbs. 
Lipton's  Tea  @  95c,  500  lbs.  Cinnamon  @  90c,  at  delivered  price. 
Prepaid  freight  to  C.  &  E.  I.  R.  R.  Co.  $29.85. 

Sold  to  A.  H.  Mohl  &  Co.,  2  15.  n  30,  100  cs.  Lima  Beans  @  $4.35. 
125  doz.  bx.  Graham  Crackers  @  $4.85,  at  delivered  price.  Prepaid 
freight  to  C.  &  E.  I.  R.  R.  Co.  $24.35.     (6b). 

No.  108.  Feb.  12.  Received  $875.63  from  Smith  &  Jones  on  account  and 
allowed  2f(  discount  on  balance  of  bill  of  Feb.  2,  $893.50.  (9b.) 

No.  10D.  Feb.  13.  Paid  office  help  for  the  week  $187.50.  Paid  the  pay  roll  of 
sales  force  for  the  week.  $218.60.  Paid  drivers  of  delivery  trucks  for 
the  week,  $48.75.     (16b). 

No.  110.  Feb.  15.  A.  II.  Mohl  &  Co.  returned  10  doz.  bx.  Graham  Crackers  at 
$4.85  for  credit.     Allowed  Davis  Bros.  $37.50  for  damaged  goods  on 

bill  of  Feb.  0.      (15a). 

No.  111!    Feb.  15.     Paid  C.  M.  &  St.  Paul  R.  R.  Co.  $118.75  for  freighl  on  goods 

purchased.     (Debit  Freight  In  on  the  credit  side  of  the  Cash  Book). 

No.  112.    Feb.  15.     Received  an  allowance  of  $44.25  from  Atlas  Trading  Co. 

for  damaged  goods  on  Invoice  No.  18,  Feb.  11.     Returned  g Is  to 

Logan.  Bryan  ,V-  Co.  to  the  value  of  $36.40  for  credit.     (11b 


96  BOOKKEEPING  AND  ACCOUNTING 

No.  113.  Feb.  15.  Gave  Atlas  Trading  Co.  a  30  daj  note  for  $1,850  at  6?,  on 
account.  Gave  Logan,  Bryan  &  Co.  ;i  30  day  oote  for  $2,100  at  6' . 
mi  account. 

No.  111.  Feb.  15.  Post  the  books  to  date  and  ascertain  the  '-ash  balance. 
(See  No.  94 

Xo.  115.    Feb.  16.     Paid  E.  L.  Jones  for  janitor  service  for  offices  on  second 
ir,  $32.50.     (Debit  Real  Estate  expense  and  Income  .     Paid  Brown 
Stationery  Co.  $138.65  for  office  stationery.       Debit  adminsitrative 
expense. 

No.  116.  Feb.  16.  Sold  to  J.  .M.  Bryanl  &  Co.,  2  15,  n  30,  100  cs.  Cinnamon, 
1,500  Lbs.  (u  90c,  750  His.  Oolong  Tea  (5  65c. 

Sold  to  A.  C  Williams  &  Co.,  2  15,  ii  30!  2,000  His.  M  &  .1  Coffee 
(3    18c,  50  cs.  Butter  Prints,  2,500  lbs.  (§    12c. 

Snlil  to  Johnson  »v.  Meyer,  '_'  !•">.  n  30,  100  bu.  Evap.  Apples  @ 
$4.75,  100  bx.  A.  A.  Prunes  (§  $5.75. 

Sold  in  Harper  Bros.,  2  15,  n  30,  1,250  lbs.  Oolong  Tea  (5  65c, 
300  ll.s.  Cloves  <§  $1.35. 

Xo.  117.  Feb.  17.  Paid  West,,,,  Tea  &  Coffee  Co.  $1,063.51  and  received  ■'■ , 
discount  on  balance  of  Invoice  of  Feb.  3,  $1,096.40.  (15b  .  Re- 
ceived  $721.85  for  sundry  rash  sales.     (5b  . 

No.  118.  Feb.  18.  Paid  Owen  Coal  Co.  $1S0  for  40  tons  of  coal  for  heating 
store  building.  (Debil  Administrative  Expense  on  the  credit  side 
of  the  I  ash   Book). 

Xo.  119.  Feb.  18.  Paid  the  Daily  News  $128.50  for  advertising  spare  from 
Feb.  11  tn  Feb.  18.  Debit  Selling  Expense  on  the  credil  side  of  the 
Cash    Book). 

No.  120.  Feb.  18.  Purchased  of  United  Fruil  Co.  merchandise  as  per  Invoice 
No.  22,  3  15,  ii  60,  $1,254.35.  Purchased  of  J.  II.  Morgan  Grocer 
Co.  Invoice  No.  23,  3  15,  n  60,  $948.75.  Purchased  of  Weston  Ten 
&  Coffee  Co.  Invoice  Xo.  24,  3  15,  n  60,  $750.  Purchased  of  Atlas 
Trading  Co.,  Invoice  No.  25,  3  15,  n  60,  $850. 

No.  121.  Feb.  Is.  Paid  Seaman  Grocer  Co  $957.97  and  received  3^i  discount 
on  Invoice  of  Feb.  :i.  I'aiil  J.  II.  Morgan  Grocer  Co  $803.15  on 
accounl  and  received  •'!'.  discounl  on  balance  of  Invoice  of  Feb.  :'>. 
$827.99.     (15b        W.  J.   Emerson  drew  $52.50   for  his  private  use. 

No.  122.    Feb.  is.     I; lived  $1,758.75  from  D.  M.  Noe  &  Co.  to  paj  their  30 

day  note  of  $1,750  at    t:\    and   interest.     Received   $1,909.50   from 

\V.  II.   .Mason  &  Sons  to  pay   their  30  <la.\    note  of  $1,! at   6'  i    and 

interest.  (Enter  in  (ash  Book  separately.  Credit  Notes  Receiv- 
able on  the  debit  side  of  the  Cash  Book,  and.  on  the  aexl  line,  credil 
Interest  and  Discount  for  the  amount  of  the  interest  iii  each  case. 
Write  "  Interi'st  on  above  note"  in  the  explanation  column  to  explain 

the    [ntereSt    and    ni^«i>unt    entries 

No.  12:1.  Feb.  18.  Paid  R.  K.  .Miller  &  Co.  $1,658.25  to  pay  our  30  day  note 
of  $1,650  at    C,    and   the   interest,  due   today.      Paid   Seaman   Grocer 

Co.  $1,809.00  to  paj  our30daj  note  for  $1,800  a1  C  .  and  the  interest, 
due  today,  i  Enter  separately.  Debil  Notes  Payable  on  the  credil 
side  of  the  Cash  Book  for  the  face  value,  and.  on  the  next  line,  debit 
Interest  ami  Discounl  for  the  amount  of  the  interest  iii  each  ease), 


BOOKKEEPING  AND  ACCOUNTING  97 

No.  124.  Feb.  IS.  When  the  pages  of  the  Cash  Book  are  filled  or  nearly  so. 
transfer  the  Cash  Book  to  the  next  two  blank  pages  by  ruling  single 
and  double  red  ink  lines,  near  the  bottom,  across  the  filled  page, 
making  the  lines  exactly  opposite  on  each  page,  regardless  of  whether 
both  pages  are  tilled  to  the  same  line.  Total  each  column  of  each 
page  between  the  ruled  lines,  and  write  "amounts  carried  forward" 
on  the  same  line  as  the  footings,  and  turn  to  the  next  two  blank  pages 
and  write  "amounts  brought  forward"'  on  the  first  writing  line 
of  the  new  pages,  and  firing  the  totals  of  the  columns  of  the  pre- 
ceding pages  to  the  top  of  the  proper  columns  of  these  new  pages, 
then  proceed  with  the  entries  that  follow,  as  usual.  Transfer  the 
Cash  Book  at  this  point,  though  the  pages  may  not  be  entirely  filled. 

No.  125.    Feb.  18.     Post  the  books  to  date,  and  ascertain  the  cash  balance. 

No.  126.  Feb.  19.  Received  $15.75  from  C.  M.  &  St,  Paul  R.  R.  Co.  rebate  on 
freight  bill  of  Feb.  15.  \V.  II.  Whitaker  returned  $18.75  of  the 
money  drawn  for  his  private  use  on  Feb.  10.  Received  $895.40  for 
sundry  cash  sales. 

No.  127.  Feb.  19.  Sold  to  D.  M.  Noe  &  Co.,  2/15,  n/30,  20  cs.  Cloves,  500  lbs. 
@  85c,  1,000  lbs.  Black  Tea  @  72c. 

Sold  to  Davis  Bros.,  2  15,  n/30,  1,000  lbs.  Condor  Coffee  @  85c, 
500  lbs.  Oolong  Tea  @  65c. 

Sold  to  Dwight  Bros.  2  15,  n  30,  100  bx.  Silver  Prunes  @  $5.15, 
125  brls.  Va.  Sweet  Potatoes  @  $4.20. 

Sold  to  Smith  &  Jones.  2  15,  n  '30,  2,000  lbs.  Granulated  Sugar 
@  13c,  125  bx.  II.  Apples  @  $4.75. 

No.  128.  Feb.  20.  Paid  office  help  for  the  week,  $187.50.  Paid  pay  roll  of 
sales  force,  $218.60.     Paid  drivers  of  delivery  trucks,  $48.75. 

No.  129.  Feb.  20.  Received  $437.32  from  Harper  Bros,  on  account  and 
allowed  2%  discount  on  bill  of  Feb.  5.  Received  $624.95  for  sundry 
cash  sales. 

No.  130.  Feb.  20.  Received  a  30  day  note  for  $2,010  at  6%  from  A.  C.  Williams 
&  Co.  on  account.  Received  a  30  day  note  for  $1,837.50  at  6%  from 
J.  M.  Bryant  &  Co.  on  account. 

No.  131.    Feb.  22.    Paid  United  Fruit  Co.  $1,178.94  on  account  and  received  3' , 
discount  on  Invoice  of  Feb.  6.     Paid  R.  K.  .Miller  &  Co.  $1,188.54 
and  received  3','    discount  on  Invoice  of  Feb.  6.     Paid  See-Moon  & 
Co.  $919.07  and  received  3r;    discount  on  Invoice  of  Feb.  6. 

No.  132.  Feb.  23.  Purchased  of  R.  K.  Miller  &  Co.  merchandise  as  per  Invoice 
No.  26.  3  15,  n  60.  $1,285.70.  Purchased  of  See-Moon  &  Co.  Invoice 
Xo.  27,  3  15,  n  60.  $1,321.75. 

No.  133.  Feb.  24.  W.  J.  Emerson  and  W.  II.  Whitaker  gave  their  personal 
checks  for  $1,500  each,  as  an  additional  investment. 

Xo.  134.  Feb.  24.  Collected  $73.25  for  United  Fruit  Co.,  which  they  instruct 
us  to  place  to  their  credit. 

No.  135.  Feb.  24.  Allowed  Harper  Bros.  $84.25  for  damaged  goods  on  bill 
of  Feb.  16. 


98  I'.(i()KKi;i;i'l\i;   AND  ACCOUNTING 

No.  136.  Feb.  24,  Purchased  of  Logan,  Bryan  &  Co.  merchandise  as  per 
Invoice  No.  28,  3  15,  □  60,  $650.  Purchased  of  Seaman  Grocer  Co. 
[nvoice  No.  29,  3   15,  □  60,  $750. 

No.  137.  Feb.  24.  Sold  to  W.  II.  Mason  &  Sons,  2  15,  n  30,  30  bx.  Evap. 
Apples  (§  $3.75,  15  cs.  Ideal  Tomatoes  (§  $3.25. 

Sold  to  A.  II.  Mold  &  Co.  2  15,  n  30,  1,500  lbs.  M  &  .1  Co 
45c,  50  cs.  Luna  Beans  (g  $4  35. 

Sold  to   A.  C.    Williams  &  Co..  2   l.'».   n   :!H.   l.ouu  lbs.  Oolon-  Tea 

@  65c,  1,1 lbs.  Granulated  Sugar  (§    12c. 

Sold  to  -I.  M.  Bryant  &  Co.  2  15,  o  30,  50  cs.  >,  lb.  Ground  Pepper 

@  $5.25,  1,000  lbs.  Lipton  Tea  (a   75c 

No.  138.  Feb.  24.  Paid  C.  &  A.  R.  R.  Co.  $187.50  for  freight  on  poods  pur- 
chased.    Received  $484  35  for  sundry  cash  sales. 

No.  139.  Feb.  24.  Received  $818.30  from  I).  M.  Noe  &  Co.  and  allowed  2', 
discount  on  bill  of  Feb.  9.  Received  +><!(>. 70  from  Dwkdit  Bros  and 
allowed  2',  discounl  on  bill  id'  Feb.  9.  Received  $945.70  from  Davis 
Bros,  and  allowed  2',  discount  on  balance  of  bill  of  Feb.  !'.  $965 
Received  $881.02  from  \Y.  II.  Mason  &  Co.  and  allowed  2',  discount 
on  bill  of  Feb.  0. 

No.  140.  Feb.  25.  Received  $716.50  for  sundry  cash  sales.  Paid  Central 
.National  Bank  $3,500  for  our  MO  day  note  due  today.     (Interest  was 

paid  in  advance  on  this  note.  | 

Xo.  141.  Feb.  25.  paid  our  $5,000  note  at  the  Central  National  Bank  by 
giving  a  new  note.  MO  days,  for  $3,750  at  ti',  and  our  check  for  the 
difference   and   the   interest    on    the   new   Hole.      (56b    . 

Xo.  112.  Feb.  2ti.  Paid  Murch  Bros.  s47.5ii  for  repairing  and  revarnishing 
office  furniture.  Paid  Empire  Fixture  Co.  $68.50  for  repairing  and 
resetting   store    Fixtures.     (Debit    Office    Equipment    Expense    and 

Store   Fixtures   Kxpense  I 

Xo.  1  (M.    Feb.  26,     Paid  Seaman  Grocer  Co.  $1,854.93  on  account  and  received 

M',    discount  on  Invoice  of  Feb.  11. 

Xo.  114.  Feb.  26.  Allowed  D.  M.  Noe  &  Co.  +47.5o  for  shortage  on  bill  of 
Feb.  19. 

Xo.  145.  Feb.  27.  Paid  office  I. el,,  for  the  week  $187.50.  Paid  sales  force 
for  the  week  $218.60.     Paid  delivery  drivers   for  the  week  $48.75. 

Xo.  146.  Feb.  27.  Received  $906.50  from  Johnson  &  Meyer  which  pays  bill 
of  Feb.   12  in   full,  allowing  2',    discount.     Received  $972.89  from 

A.  II.  Mohl  &  C.  to  pay  balance  of  $992.75  on  bill  of  Feb.  12.     Re- 
eeived  $649!75  for  sundry  cash  sales. 

Xo.  147.  Feb.  28.  Paid  partners  $250  each  tor  their  salaries  lor  the  month. 
(Charge  half  to  Administrative  Expense  and  half  to  Selling  Expense 

If  a   separate   salary   ace, Mint    were    kept,    this    would    be   charged    to 
"Salaries"  account.  | 

Xo.   148.    Feb.  28.     Post  the  books  to  date,  but  In  fore  beginning  to  posl  res 
61b.      Follow   the    instructions   given   there.      After   posting,   lake  a 


BOOKKEEPING  AND  ACCOUNTING  99 

Trial  Balance,  then  prepare  and  post  journal  entries  to  record  the 
following  inventories : 

Merchandise  Inventory,  Feb.  28 $12,896.80 

Insurance    (expired)    15.00 

Accrued  Assets : 

Interest  Accrued  on  Notes  Receivable $5.18 

Interest  Paid  in  advance  on  loan  at  bank 16.87 

Accrued  Liabilities: 

Interest  accrued  on  Notes  Payable $8.56 

Interest  accrued  on  Mortgage  Payable 28.00 

Unpaid  office  help 31.25 

Unpaid  sales  force 36.43 

Unpaid  delivery  drivers 8.13 

Deferred  Charges  to  Operation  : 

Postage  and  office  supplies  on  hand $42.50 

Advertising  matter  on  hand 67.50 

Depreciation : 

10%  on  Office  Equipment $74.70 

10%  of  Store  Fixtures 78.84 

10%  on  Deliverv  Equipment 105.00 

2%  on  Building 341.30 

Reserve  for  Doubtful  Accounts : 

Additional  reserve  of  3%  of  Accounts  Receivable      $275.87 

Note:  The  above  depreciation  and  the  reserve  for  bad  debts  is  in  addition  to  the 
depreciation  and  reserve  set  up  at  the  end  of  January.  In  practice,  10%  depreciation  would 
not  be  written  off  for  a  period  of  one  month.  If  the  life  of  property  such  as  delivery  equip- 
ment is  estimated  at  10  years,  then  10%  would  be  the  depreciation  for  one  year.  Fifteen 
per  cent  per  year  would  be  more  reasonable  for  delivery  equipment,  considering  the  life 
of  trucks  to  be  six  years,  which  would  write  off  90%  in  six  years  and  the  balance  would 
be  considered  the  scrap  value.  On  office  equipment  and  store  fixtures,  10';  depreciation 
on  a  basis  of  10  years  would  be  allowable.  On  buildings  not  more  than  -r',  or  '.','',  should 
lie  written  off.  On  some  kinds  of  machinery  from  10%  to  50%  would  be  reasonable,  depend- 
ing on  the  probable  life  of  the  machines. 

No.  149.  Take  the  Final  Trial  Balance,  and  prepare  a  Balance  Sheet,  Profit 
and  Loss  Statement  and  close  the  books,  showing  the  Trading  Section,  and  the 
Profit  and  Loss  Section  in  the  Profit  and  Loss  account  to  conform  with  the  Profit 
and  Loss  Statement.    See  Illustration  No.  27. 

No.  150.  You  are  instructed  to  close  the  partners'  Personal  accounts  into 
their  Capital  accounts  and  to  distribute  the  surplus  or  net  profit  by  crediting 
each  partner's  Capital  account  with  his  share  of  the  profit.     (See  65b.) 

No.  151.  Take  a  proof  Trial  Balance  and  compare  it  with  the  Balance  Sheet. 

No.  152.  Prepare  and  post  journal  entries  to  close  Accrued  Assets.  Accrued 
Liabilities  and  Deferred  Charges  to  Operation  accounts,  and  transfer  the  items 
under  these  accounts  back  to  the  Operating  expense  accounts  that  are  affected. 
Date  these  .March  1. 

No.  153.  "We  have  just  learned  that  W.  IT.  Mason  &  Sons  have  utterly  failed, 
and  the  amount  they  owe  us  is  a  total  loss.  Prepare  and  post  a  journal  entry  to 
adjust  this  loss  and  close  their  account.  (Debit  "Reserve  for  Doubtful  Ac- 
counts" and  credit  W,  II.  .Mason  &  Suns.)     (See  68b.) 


100 


KOOKKKKIMXG   AND  ACCOUNTING 


No.  154.   Work  oul  a  comparative  statemenl  for  W.  J.  Emerson  Chapter  111. 
for  the  month  of  January,  and  the  data  from  this,  the  business  of  W.  J.  Emerson 

&  Co.,  Chapter  V.  for  the  month  of  February,  comprising  the  Cosl  of  G Is 

Sold,  Ne1  Sales,  Gross  Profit,  Operating  Expenses  and  the  Net  Profil  for  each 
period. 

73.  Comparative  Statecent.  W.  J.  Emerson  &  Co.  of 

Coats,  Sales,  Expenses.  Profits  and  Percentages  for 

January  and  February.  192 


January 
192 

Per  Cent 

of 

Sales 

February 
192 

Per  Cent 

of 

Sales 

Inoreaae 

Deorease 

Net    Sales 

14572 

30 

29416 

20 

14843 

90 

Cost    of  Goods   Sold 

9823 

80 

17104 

00 

7360 

20 

Cross  Profit 

4746 

50 

32 .  58£ 

12232 

20 

41. 58* 

7483 

70 

Operating  Expenses 

3039 

49 

20.  e# 

3816 

60 

12.94$ 

777 

31 

Ket   Profit 

1971 

37 

13.52$ 

8086 

25 

27.495J 

6114 

88 

ILLUSTRATION    NO     54       COMPARATIVE    STATEMENT 

74.  Mr.  E rson  calls  your  attention  to  the  fad  thai  on  February  1,  we 

had  cash  on  hand  $15,127.66,  and  now  on  February  28  we  have  cash  on  hand 
si  1,945.40,  and  thai  your  reporl  shows  our  ael  profil  to  be  $8,086.25.  He  asks 
you  "Where  is  this  profil  .'"  The  following  statemenl  showing  the  increase  and 
decrease  in  Assets  and  Liabilities  will  show  where  this  profil  is: 


Feb.    1 

Feb.    26 

192 

192 

Increase      Decrease 

Assets: 

Cash 

IB  12  7 

66 

14945 

40 

26 

Notes  Receivable 

3650 

00 

3847 

50 

197 

50 

Accounts   Receivable 

4692 

52 

8690 

90 

3996 

36 

Insuranoe 

165 

00 

150 

00 

15 

00 

Ldse.    Inventory 

8954 

75 

12896 

80 

3942 

05 

Accrued  Assets 

21 

30 

36 

24 

14 

94 

Deforred  Assets 

196 

90 

110 

00 

88 

90 

Office  Equipment 

672 

30 

597 

60 

74 

70 

Store  Fixtures 

709 

56 

630 

72 

76 

84 

Delivery    Equipment 

945 

00 

840 

00 

105 

00 

Building 

16000 

00 

16724 

10 

724 

10 

Land 

2500 

00 

2500 

00 

Ket    Inorease   In  Assets 

8332 

27 

8676 

97 

6876 

97 

Liabilities: 

Totes  Payable 

6950 

00 

7700 

oc 

750 

00 

Aocounts  Fayab-le 

7265 

05 

9079 

40 

1814 

35 

Accrued   Liabilities 

229 

20 

112 

37 

116 

83 

Mortgage  Fayable 

6000 

00 

6000 

00 

net   Increase   in 

Liabilities 

2447 

52 

2564 

35 

2564 

35 

ILLUSTRATION 


INCREASE   ami  ASSETS  AND   LIABILITIES  TO  SHOW 

'      0]      PR<  IPIT 


BOOKKEEPING  AND  ACCOUNTING  101 

Increase  in  Assets $8,332.27 

Less  Increase  in  Liabilities 2,447.52 

Net  Increase $5,884.75 

Add : 

Withdrawn  by  partners $2,000.00 

Partners'  Drawing  Accounts 201.50 

Net  Profits  as  per  Exhibit  B $8,086.25 

In  the  Assets,  every  increase  shows  a  gain,  and  t'wvy  decrease  shows  a  loss. 
In  the  Liabilities,  every  increase  shows  a  loss,  and  every  decrease  shows  a  gain. 
The  Net  Increase  in  Assets  show  $8,332.27  gain.  The  Net  Increase  in  Liabilities 
shows  $2,447.52  loss.  The  difference,  $5,884.75,  shows  the  part  of  the  profit  in 
the  Assets  over  the  Liabilities.  The  Partners  have  drawn  against  the  profits 
$2,201.50  which  added  to  the  $5,884.75  accounts  for  the  net  profit  for  the  period. 
$8,086.25.  Usually,  when  the  partners  draw  against  profits,  the  amounts  drawn 
are  debited  to  their  Personal  accounts,  unless  otherwise  instructed. 

75.     COMPARATIVE   STATEMENT.      CENTRAL   CONTRACTING  CO. 

The  following  statement  compares  the  results  for  the  corresponding 
months  each  year  for  four  years.  It  may  be  extended  to  each  month  for  the 
year,  and  for  any  number  of  years  desired. 


October 
Volume 
Loss 
Gain 


1917 
,520.78 
182.85 


November 
Volume 
Loss 
Gain 


1917 
115,967. 32 
806-22 


December 
Volume 
Loss 
Gain 


1917 

$10,482.59 
1,504.36 


Total  3  Months 

Volume 

Loss 

Gain 


1917 

|44,970.69 

2.493.43 


1918 
$23,897.39 

2,390.22 


1918 

$14,785.42 
200.15 


1918 
$13,727.00 

1,618.16 


1918 
$52,409.81 

3,808.23 


1919 

$17,944.77 

1,076.32 


1919 
$16,059.03 

1,157.93 


1919 
$14,873. 13 

2,150.98 


1919 
?46,876.93 

4,385.23 


1920 
$17,915.15 

3,534.05 


1920 
$15,207.41 

1,274.96 


1920 
$17,615.32 

4,105-51 


1920 
$50,737.88 

8,914.52 


ILLUSTRATION    NO.     56.      MONTHLY    COMPARATIVE    STATEMENT. 

A  comparative  statement  of  this  kind  may  be  prepared  for  any  business 
where  the  inventory  is  taken  at  the  end  of  each  month,  or  each  three  months 
in  which  case  use  First  Quarter,  Second  Quarter,  Third  Quarter,  Fourth  Quar- 
ter in  the  place  of  the  name  of  the  month. 


PROBLEM  10.  DETAILED  STATEMENTS  AND  SCHEDULES 

Prepare  a  detailed  Statement  reconciling  the  amount  of  the  Administrative 
Expense  and  the  amount  of  the  Selling  Expense  in  the  business  of  W.  J.  Emer- 
son &  Co..  for  the  month  of  February.  Prepare  Schedules  reconciling  Ac- 
counts Receivable  and  Accounts  Payable,  giving  the  due  dates.  See  paragraph 
33  and  34  and  notes  and  illustrations. 


L02 


BOOB  KEEPING  AND  ACCOUNTING 


COMPARATIVE  BALANCE  SHEET 

Comparative  Balance  Sheet:  The  Balance  Sheets  of  two  or  more  differenl 
periods  may  be  arranged  in  parallel  columns  for  easy  comparison.  The  Bal- 
ance Sheet  (if  a  business  al  the  beginning  of  the  year  may  be  compared  with 
the  I '.a  la  nee  Sheel  at  the  end  of  the  year.  The  same  is  true  for  any  two  periods. 
The  purpose  is  to  imlicate  the  changes  in  the  condition  of  the  business.  Usually 
the  reports  and  statements  already  shown  are  sufficient  information  for  the 
management,  bul  a  comparative  Balance  Sheel  and  a  comparative  Profit  and 
Loss  statement  may  lie  furnished.    The  following  is  the  comparative  Balance 

M t  of  W   -l    Emerson  for  January  with  the  Balance  Sheet  of  W.  J.  Emerson 

(.v;  Co.  for  February.  Profil  and  Loss  Statements  may  be  compared  in  the  same 
way.  The  student  is  required  to  prepare  this  comparative  Balance  sheet  from 
his  books  in  the  form  shown  in  the  following: 

Comparative  Balance  Sheel  of  W.  J.  Emerson  and  YY.  .1.  Emerson  &  Co.  at 
the  end  of  January  with  their  Balance  Sheet  at  the  end  of  February. 


January ,192 


February. 192 


Current  and  Accrued  Assets: 

Ca3h - 

Botes  Reoelvable  

Less  Notes  Rec .  Discounted  .  .  . 
Accounts  Receivable   

Less  Reserve  for  Bad  Debts  .  .  . 

Accrued  Assets  

l!dse.  Inventory,  Jan.  31 

Total  Current  and  Acorued  Assets 

Deferred  Assets: 


Insurance  Unexpired   .  .  . 
Office  Supplies  on  hand 
Advertising  Matter  on  hand 
Total  Deferred  Assets 


Fixed  Assets: 


Office  F.qulpment 

Less  Res.  for  Depreciation  . 
Store  Fixtures    

Less  Res.  for  Depreciation  . 
Delivery  Equipment  

Less  Res.  for  Depreciation  . 
Building   

Less  Res.  for  Depreciation  . 

Land   

Total  AS30ts 


Inabilities: 


llotes  Payable 

Aocounts  Payable '.    .    . 

Accrued  Liabilities   

Mortgage  Payable  

Total  Liabilities   

Bet  Worth  or  Present  Capital 


4939.50 
246.98 


165.00 

72.50 

126.40 


747.00 
74.70 


788.40 
78.64 


1050.00 
105 . 00 


6950.00 

7265.05 

229.20 


11031.29 
3650.00 


4692.52 

21.30 

8954.75 


26349.86 

363.90 

672.30 
709.56 
945.00 


31040.62 


14444.25 


16596  37 


6478.54 
2631.04 


9195.75 
504.85 


150.00 
42.60 

67.50 


747.00 
149.40 


788.40 

157.68 


1050.00 
210.00 


17065.40 
341.30 


7700.00 

9079.40 

112.37 

6000.00 


ir.i.rsTUATioN  no.  r»7.    comparative  balance  sheet 


14945.40 

3647.50 

8690- 90 

36.24 

1269  6  80 


40416.84 


260  00 

597.60 
630.72 
640. OC 

16724.10 

2500.00 


61969.26 


22691.77 


39077.49 


Prepare  a   comparative   Profit    and    Loss  Statement    for   W.  -T.  Emerson, 
chapter  II.  and  \V.  J.  Emerson  &  Co.,  Chapter  V,  in  similar  form  to  the  com 
parative  Balance  Sheet   above.     Comparative  Statements  are  a   satisfaction 
and  are  useful,  but  the  papers  already  suggested  to  be  submitted  to  the  man- 
agement are  in  more  usable  form  for  the  average  person. 


BOOKKEEPING  AND  A*  Vol  N'TINC 


103 


PROBLEM  11.     COMPARATIVE   STATEMENT 

The  following  shows  the  Final  Trial  Balances  before  closing  for  the  last 
two  six  month  periods  of  J.  ('.  .Miner  &  Co.  Prepare  a  Balance  Sheet  and  a 
Profit  and  Loss  Statement  from  each  of  these  Trial  Balances,  then  prepare  a 
Comparative  Statement  of  the  two  periods,  showing  Costs,  Sales,  Expenses. 
Profits  and  Percentages,  as  in  paragraph  73.  All  adjustment  entries  have 
been  made  and  posted.  The  Merchandise  Inventory  at  the  beginning  of  each 
period  is  shown  in  the  Trial  Balance.  The  Merchandise  Inventory  at  the  end  of 
the  first  period  was  $16,421.75,  and  at  the  end  of  the  second  period  is 
$23,275.60.  The  first  period  extends  from  January  1  to  June  30,  and  the  second 
period  from  July  1  to  Dec.  31. 

Final  Trial  Balance,   J.   C.   Miner  &  Co.    for  November  and  December. 


Final   Trial   Balance 
June   30,    192 


Final   Trial  Balance 
Deo.    31.    192 


J.   C.   Miners.   Capital    

J.   C.   Miners,    Personal      .... 

C.    P.   Jones,   Capital      

C.    P.    Jones,   Personal    

Cash 

Rotes  Receivable   

Accounts  Receivable  

Hotes  Payable  

Accounts  Payable   

Insurance  

Office  Equipment   

Store  Fixtures   

Delivery  Equipment   

lldse .  Inventory  at  beginning 

of  the  period 

Purchases  .  .  .  .' 

Purchases  Returns  and  Allowances 

Freight  In   

Purchases  Discount   .' 

Sales  ....  

Sales  Returns'  and  Allowances 

Sales  Discount   

Freight  Out  

Administrative  Expense   .... 

Selling  Expense  

Delivery  Expense   

Loss  on  Bad  Debts  

Interest  and  Discount  

Accrued  Assets   

Aocrued  Liabilities  

De-ferred  Charges  to  Operation  . 
Reserve  for  Dep.on  Offioe  Equip. 
Reserve  for  Dep.on  Store  Fixtures 
Reserve  for  Dep.on  Delivery  Equip 
Reserve  for  Bad  Debts  


127 


5748 
4942 
6875 


320 

897 

1125 

875 

9864 
32394 

628 


437 

342 

349 

1265 

2950 

1135 

385 

125 

328 

341 


71481 


50 


45 


12000 

12000 
51 


5645 
2875 


341 

787 

36629 


275 

69 
112 

87 
385 


71461 


166 

123 

6214 
5895 
8614 


240 

897 

1125 

875 

16421 
39496 

625 


595 

427 

624 

1564 

3743 

1387 

325 

175 

475 

498 


15 


90716 


15 


14195 
14195 


4574 
5275 


845 

1157 

48796 


385 

179 
225 
175 

710 


90716 


60 

60 


no 

30 


90 

50 

CO 
00 

00 


15 


Suggestion:  AVhile  the  problems  in  between  the  sets  are  as  important  as 
the  bookkeeping,  it  is  not  the  idea  to  hold  the  student  away  from  the  regular 
bookkeeping  work.  The  intention  is  for  the  student  to  proceed  with  the  reg- 
ular work  of  bookkeeping  and  work  out  the  problems  at  convenient  times  so  as 
not  to  interfere  with  the  regular  class  work.  It  is  not  necessary  thai  all  stu- 
dents be  held  at  the  same  place  in  the  course.  The  discussions  of  material  points 
that  may  be  taken  up  in  class  will  be  as  valuable  to  the  student  whatever  the 
advancement  in  the  bookkeeping.  However,  the  nearer  a  student  works  out 
the  problems  up  to  his  advancement  in  the  course  the  better,  and  the  more 
satisfactory  and  successful  will  be  the  results. 


104  BOOKKEEPING  AND  ACCOUNTING 


PARTNERSHIP  ACCOUNTING 

76.  The  purpose  of  forming  a  partnership  may  be  to  concentrate  more  cap- 
ital needed  to  enlarge  the  business,  or  to  combine  different  kinds  of  business 
efficiency,  or  for  the  cooperation  of  persons  of  wealth  with  a  person,  or  persons, 
who  nave  the  accessary  knowledge  and  experience.    To  eliminate  competition 

and  i ionomize  on  expenses  are  other  reasons  for  forming  partnerships,  and 

the  reasons  such  organizations  will  continue  to  be  formed. 

All    partnerships    should   begin    with   a    written   contract    or   agreemi 
known  as  "Articles  of  Copartnership,"  which  should  be  prepared  by  a  law- 
yer, in  which  all  th'-  essential  facts  of  the  understanding  between  the  partners 
are  clearly  stated,  such  as : 

1.  Dale,  and  aames  of  the  parties.  .").     Provision  for  signing  papers  and 

2.  Purpose,  name  of  business,  and  checks. 

name  of  firm.  (i.     Duties  or  rights  of  partners. 

3.  Assets  and  Liabilities,  guarantee,  7.     Duration   of  fiscal   period   when 

and  attached  schedules.  profits  are  to  be  distributed 

4.  Amount   of   investment,  division  S.     Liquidation  upon  dissolution. 

of  profits  and  lossi  s,  withdraw- 
als and  compensation. 

77.  The  legal  relations  of  partners  in  the  event  of  death,  retirement,  their 
liability  under  certain  conditions,  etc.,  cannol  be  discussed  bere  sufficiently 
comprehensive,  and  the  accountant  should  make  a  careful  study  of  them  in 
the  law  texl  and  special  works  on  this  subject.  The  liability  of  partners  may 
be  unlimited,  as  in  the  case  of  a  '■common  law  partnership,"  or  a  limited 
partnership  may  be  created  by  "act  of  legislature"  of  the  state  in  which 
it  is  located,  whereby  the  liability  of  the  partner  is  limited. 

The  simple  fact  that  a  person  shares  in  the  pmlits  of  a  business  does  not 
necessarily  mean  thai  a  partnership  exists,  but  it  is  one  indication.  One  may 
agree  to  receive  a  share  of  the  profits  of  a  business  in  lieu  of  rent  or  rights 
and  yet  not  be  a  partner  nor  liable  for  debts  of  the  business  as  a  partner.  If 
a  person  should  allow  his  name  to  be  used  as  if  he  were  a  partner  in  order 
to  influence  others,  he  is  liable  as  a  partner  whether  he  is  a  partner  or  not. 

78.  Accounting:  The  system  of  bookkeeping  and  accounting  in  a  part- 
nership business,  is  in  no  way  different  from  that  of  an  individual  or  sole 
proprietor,  excepl  thai  separate  Capital  accounts  arc  kept  for  each  part- 
ner.    The  routine  of  I kkeeping  is  the  same.     The  purpose  of  the  owners' 

Personal  account,  sometimes  called  the  "Drawing  Account,"'  is  to  keep  the 
smaller  items,  not  intended  for  investment  nor  withdrawal  from  capital, 
out  of  the  Capital  account.  At  the  end  of  Ihe  year  or  period,  the  Personal 
account  may  be  (dosed  into  the  Capital  account,  or  allowed  to  run  as  desired 
by  the  owners.  Traveling  expenses  or  other  expenses  of  a  partner  or  owner  in 
tin'  interest  of  the  business,  would  be  charged  to  an  expense  account  and  cash 

credited,  when  he  is  reimbursed  for  the  money  spent,  but  should  the  partner 

hand  in  bis  expense  slip  and  not  desire  the  cash,  a  journal  entry  would  be  re- 
quired. Debit  "Traveling  Expense"  or  "Administrative  Expense"  or  what- 
ever is  the  proper  expense  account,  ami  credit  the  partner's  Personal  account. 

79.  Opening  Entries:  If  two  or  more  persons  form  a  partnership,  the 
opening  entry  should  contain  a  separate  journal  entry  for  each.  If  there  are 
assets  and  liabilities,  each  asset  is  debited  and  each  liability  is  credited,  and 
the  Partner's  Capital  account  is  credited  for  the  difference  his  net  invest- 
ment. 


BOOKKEEPING  AND  ACCOUNTING 


10."> 


Suppose  L.  D.  Miller,  J.  M.  Zion  and  D.  I'.  Mason  have  formed  a  partner- 
ship. L.  D.  Miller  invests  cash  only,  J.  M.  Zion  invests  cash  and  other  assets, 
1).  P.  Mason  invests  cash  and  other  assets  and  lias  liabilities  which  it  is  agreed 
the  firm  shall  assume.    The  opening  entry  would  be  as  follows: 

January  1,  192 


S 


L.  D.  Miller,  3.   M.  Zion  and  D.  P.  Uaeon 
have  formed  a  partnership  aooording  to  Articles 
of  Copartnership  signed  and  executed  this  day. 
They  are  to  share  profits  and  bear  losses  in 
proportion  to  their  investments,  and  each  part 
ner  shall  draw  a  salary  of  $100  a  month.  Their 
Investments  are  a3  follows: 


Cash 

L.  D.  Killer,  Capital 

Investment  as  per  agreement. 


Cash 

Merchandise 
Notes  Receivable 

J.  M.  Zion,  Capital 

Investment  as  per  agreement. 


Cash 

Merchandise 

Botes  Receivable 

Office  Equipment 

Accounts  Receivable 
Motes  Payable 
Aooounts  Payable 
D.  P.  Mason,  Capital 

Investment  as  per  agreement 


5000 


3500 
2500 
1000 


2500 
3000 
2500 
750 
3750 


oc 


5000 


7000 


2000 
1500 
9000 


00 


00 


ILLUSTRATION   NO.   58.      OPENING    ENTRY    FOR   A   PARTNERSHIP 

The  Cash  account  is  checked  because  it  is  debited  by  being  entered  on  the 
debit  side  of  the  Cash  Book,  where  it  is  checked  again,  so  it  will  not  be  posted. 
The  details  of  Accounts  Receivable.  Accounts  Payable,  Notes  Receivable,  and 
notes  Payable  would  be  scheduled  and  attached  to  the  Articles  of  Copartnership. 
80.  Usually  the  assets  represented  by  notes  and  accounts  are  guaranteed 
by  the  partner  investing  them,  then  the  loss,  in  ease  of  default  in  payment, 
falls  upon  the  partner  who  guaranteed  this  asset.  Suppose  a  note  of  $500  thai 
was  listed  by  a  partner  were  placed  in  the  bank  for  collection,  and  payment 
was  refused.  The  hank  protests  the  note  and  the  firm  pays  the  protest  charges. 
$2.50     What  entry.'    Charge  it  to  the  partner  guaranteeing  it. 

(Partner)  Personal  $502.50 

Notes  Receivable    $500.00 

Cash    2.50 

Should  one  of  the  Accounts  Receivable,  which  are  guaranteed,  prove  to  be 
uncollectable,  amount  $375.60.  the  entry  would  be: 

(Partner)  Personal    $375.60 

Accounts  Receivable   (customer's  name)  5.60 

However,  if  there  is  no  guarantee  of  the  assets  invested,  the  business  would 
sustain  the  loss,  and  the  usual  routine  entry  would  be  made  for  it. 


JOG  BOOKKEEPING  AND  ACCOUNTING 

81.  Closing  Entries:  "Closing  the  Books,"  thai  is.  closing  "nominal"  ac 
counts  i"  the  Profil  and  Loss  account,  is  the  same  whether  a  sole  owner  or  two 

or  more  partners.     Where  there  arc  tw ■  more  partners,  a  journal  entry 

is  required  to  close  the  Profil  and  Los  account  and  adjusl  the  net  profil  l>y 

dividing  it  among  the  partners.     It'  there  is  no  written  agree nl  specifying 

how  profits  shall  be  shared  or  the  bearing  of  losses,  then  the  profits  or  Losses 
are  shared  or  borne  equally  regardless  of  the  amounl  invested  by  each. 

82.  Proposition  No.  1:  Suppose  -I-  W.  Perkins  and  0.  C.  Nelson  are  part- 
ners    J.  W,  Perkins'  nel  investment  is  $7, i  and  0.  C.  Nelson's  oel  invi 

menl  is  +.".,000.  The  "Nominal"  accounts  have  been  closed  to  the  Profil  and 
Loss  account,  and  thai  accounl  now  shows  a  net  profit  of  $1,800,  to  be  adjusted 
<n  divided  between  the  partners.  There  is  nothing  in  the  agreemenl  as  to 
the  division  of  profits.  What  is  the  entry  to  close  the  Profil  and  Loss  account 
to  the  partners  I 

Profil  and  Loss  $1,800.00 

•I.  \V.  Perkins,  Capital  $90 

0.  C  Nelson,  Capital  900.00 

To  close  this  accounl  into  the  partners'  Capital  accounts. 

Note:  TIip  net  profit  would  be  closed  to  their  Personal  accounts,  if  the  partners  de- 
sired  to  draw  or  have  drawn  against  anticipated  profits.  This  would  be  optional  with  them, 
and  depend  upon  their  instruction.  The  above  entry  would  be  the  same,  of  course,  if  the 
investments  of  the  partners  were  equal. 

83.  Proposition  No.  2:  Suppose  the  copartnership  agreemenl  specifies  thai 
the  profits  shall  be  shared  and  the  hisses  borne  in  proportion  to  the  nel  in- 
vestments of  the  partners,  and  that  their  investments  and  nel  profil  are  the 
same  as  in  Proposition  No.  1,  what  is  the  closing  journal  entry  .' 

J.  W.  1'erkins"  investment    $  7,000 

O.  ( '.  Nelson 's  investment  5.000 

$12,000 

J.    W.   Perkins"  share   of  profit   is     7000    or  7/12  of  $1,800  or  $1,050 

12000 
O.  C.  Nelson's  share  of  profit  is     5000    or  5  12  of  $1,800  or  $    750 

12000 

Then,  upon   this  basis,  the   closing  journal  entry   to  adjust    the  net    pi 
would  be : 

Profil    and    Loss    $1,800 

.1    W.  Perkins.  Capital $1,050 

O.  C.  Nelson,  Capita]   750 

To  elose  this  accounl  into  the  partners'  Capital  accounts  as  per  agreement. 

84.  Proposition  No.  3:  Average  Investment:  Suppose  the  "Articles  of 
Copartnership"  specifies  that  the  partners  shall  share  profits  and  hear  losses 
according  to  their  average  investments.  Assume  that  the  Bscal  period  was  one 
year,  the  net   profil  $1,800,  and  the  partners'  accounts  were  as  follows: 


J.  W.  Perkins.  Capital 


Jan.  1  +7.000 

J.  \~V.  Perkins.  Personal 
Mar  1  $400       Feb.  1 

May  1  300 

July  1 


O.  C.  Nelson,  Capital 


]  Jan.  1  $5,000 

O.  C.  Nelson,  Personal 


Apr.  1  $225 

June  1  225 


BOOKKEEPING  AND  ACCOUNTING  107 

Determining  the  average  investment  is  a  matter  of  Arithmetic.  J.  W.  Per- 
kins has  in  the  business  $7,000  for  12  months  and  $200  in  for  11  months  (Feb. 
1  to  Jan.  1.  next).  He  lias  $4(10  out  from  .Mar.  1,  10  months;  $300  out  from  May 
1,  8  months;  $200  out  from  July  1,  six  months. 

Then,  on  the  principle  thai  the  use  of  $100  for  12  months  is  equal  to  the 
use  of  $1,200  for  one  month,  the  solution  is: 

Perkins '  Investment : 

$7,000  for  12  months  equals $84,000  for  one  mouth. 

200  for  11  months  equals....     2.200  for  one  month. 

Total    investment    $86,200  for  one  month. 

Withdrawals: 

$400  for  10  months  equals $4,000  for  one  month. 

■  100  for    8  months  equals 2.400  for  one  month. 

200  for    6  months  equals 1,200  for  one  month. 

Total  withdrawals    $7,600  for  one  month. 

Then,  $86,200  less  $7,600  is  $78,600  for  one  month,  which  is  equivalent  to 
$78,600  divided  by  12,  or  $6,550  for  12  months,  or  the  whole  time  of  the  period. 
Then  $6,550  is  J.  W.  Perkins'  average  investment. 

Nelson 's  Investment : 

$5,000  for  12  months  equals $60,000  for  one  month. 

Withdrawals : 

$225  for  9  months  equals $2,025  for  one  month. 

225  for  7  months  equals 1.575  for  one  month. 

Total   withdrawals    $3,600  for  one  month. 

Then.  $60,000  less  $3,600  is  $56,400  for  one  month  which  is  equivalent  to 
$53,400  divided  by  12  or  $4,700  for  12  months  or  the  whole  time  of  the  period. 

J.  W.  Perkins'  average   investment    $6,550 

O.  C.  Nelson's  average  investment 4,700 

Total  Average  Investments $11,250 

J.  W.  Perkins'  share  is      6550      or     131     of  $1,800  or  $1,048. 

11250  225 

O.   C.  Nelson's  share  is      4700      or      04     of  $1,800  or  $    752. 


11250  225  $1,800. 

Then  on  this  basis,  the  journal  entry  to  close  tie  Profit  and  Loss  account 
would  be : 

Profit  and  Loss $1,800 

J.  W.  Perkins   $1,048 

O.  C.  Nelson   752 

To  close  the  net  profit  into  the  partners'  Capital  accounts,  as  per  agreement 


108  BOOKKEEPING  AND  ACCOUNTING 

-•    Proposition  No.  4:     Interesl  on  Lnvesl nt:     Suppose  it  is  specified  in 

the  "Articles  of  Copartnership"  thai  the  partners  are  to  draw  t ; * ,  interest 
(in  their  investment,  and  to  be  charged  with  interest  at  the  same  r,ate  on  all 
withdrawals.  Their  Capital  accounts  arc  the  same  as  before.  The  nel  profit 
before  deducting  this  interesl  is  $1,800,  and  the  nel  profit  is  to  I"-  divided  ac- 
cording to  their  average  investment  as  shown  in  Proposition  No.  3. 

J.  W.  Perkins'  Interest  on  Investment: 

$7,000  for  12  months  at  ii\   is $420.00 

200  for  1 1  months  at  6%  is 11.00    $431.00 

Interest  on  withdrawals: 

+4(iii  for  in  months  at  0\   is $  20.00 

300  for    8  months  at  (!• ,   is 12.00 

200  for    6  months  at  69?    is 6.00    $  38.00 

•I.  W.  Perkins'  net  interesl  $393.00 

O.  C.  Nelson's  Interest  on  Investment: 

$5,000  for  12  months  at  6','   is n.00 

Interest  on  withdrawals: 

$225  for  9  months  at  II'  i    is $  10.13 

225  for  7  months  at  69i    is 7.87    $  18.00 

O.  C.  Nelson's  nel  interest $282.00 

Then  the  journal  entry  to  adjust  the  interest  to  the  partners'  accounts 
would  be: 

Profit  and    Loss    $675.00 

J.  W.  Perkins.  Personal   $393.00 

O.  ('.  Nelson,  Personal   282.00 

To  adjust  the  interesl  on  investments  as  per  agreement. 

Now.  when  this  entry  is  posted,  it  will  change  the  net  profit  shown  by  the 
Profit  and  Loss  account  to  $1,125  ($l,Sll(l  less  $675  .  and  this  amount  is  di- 
vided between  them  according  to  their  average  investments,  as  before: 

.1.  \Y.  Perkins'  share  is     6550     or     131_    of  $1,125  or  $  655. 

11250  225 

O.  C.  Nelson's  share  is     4700      or      94      of  $1,125  or  $  470. 

11250  225 

Then  the  journal  entry  to  close  the  Profit  and  Loss  account  into  the  part 
uers'  accounts  (their  Personal  accounts  this  time)  is: 

Profit    and     Loss     $1,125.00 

J.  W.  Perkins,  Personal  -'  S.OO 

i>    c.   Nelson.   Personal    170.00 

To  close  this  account  into  the  partners'  Personal  accounts,  as  per  agree- 
ment. 


BOOKKEEPING  AND  ACCOUNTING  109 

86.  Another  Method:  Another  method  for  determining  the  interest  on  the 
net  investment,  is  to  take  the  equivalent  monthly  balances  as  shown  in  Proposi- 
tion No.  :?.     Then'  you  find  J.  W.  Perkins'  average  investment  is  $78,600  for 

one  month,  and  0.  C.  Nelson's  average  investment   is  $56,400  for  one  a th, 

then: 

The  interest  on  $78,600  at  6< ,    for  1  month  is $393.00 

The  interest  on  $56,400  at  6« ,    for  1  month  is 282.00 

You  see  it  amounts  to  the  same  and  is  much  more  simple,  especially  if  the 
average  investment  must  be  determined  anyhow. 

171.  A  Study:  Now  if  the  student  will  use  ledger  paper  and  open  the 
Capital  accounts  as  shown  in  Proposition  No.  .">,  and  open  a  Profit  and  Loss 
account  (with  a  debit  balance  of  $1,800)  and  post  these  journal  entries  to 
these  accounts,  it  will  crystalize  this  whole  proposition  in  the  mind,  and  be 
much  more  satisfactory  than  simply  reading  it. 

87.  Dissolution  of  Partnership:  A  partnership  may  be  terminated  at  the 
will  of  the  partners,  or  by  the  expiration  of  the  duration  for  which  the  part- 
nership was  formed  by  the  agreement,  or  upon  the  death  of  a  partner.  Upon 
the  dissolution  of  a  partnership,  for  whatever  reason,  a  notice  of  dissolution 
should  be  inserted  in  a  newspaper  and  the  same  notice  mailed  to  all  the  trade 
with  whom  the  firm  has  had  trade  relations.  The  law  should  be  studied  by  the 
student  or  accountant  with  reference  to  the  legal  features. 

Upon  the  retiring  of  a  partner  by  the  selling  of  his  interests,  the  usual 
leual  notice  is  distributed  and  the  hooks  closed  as  at  the  end  of  a  fiscal  period, 
and  the  profit  or  loss  adjusted  to  show  the  exact  condition  of  the  partners'  ac- 
counts.   Then  the  necessary  entries  can  be  made. 

88.  Proposition  No.  5:  Suppose  .1.  \Y.  Perkins  and  O.  C.  Nelson  are  part- 
ners and  their  Capital  accounts  stand  exactly  as  shown  in  Proposition  No.  :!. 
considerino-  the  net  profit  $1,800  to  be  divided  according  to  the  partners' 
average  investment.  Each  partner  is  allowed  interest  at  6%  on  his  invest- 
ment and  charged  on  his  withdrawals  as  before.  Mr.  Nelson  decides  to  retire 
and  sell  his  interest  to  Mr.  Perkins,  How  much  should  Mr.  Perkins  pay  -Mr. 
Nelson,  and  what  entries,  if  Mr.  Nelson  agrees  to  take  $2,000  cash  and  a  P>(»- 
day  note  for  the  balance? 

As  has  already  been  determined.  Mr.  Nelson's  interest  on  the  investment  is 
$282  and  Mr.  Perkins-  interest  on  investment  is  $383.  Then  the  first  journal 
entry  is: 

Profit  and  Loss    $675.00 

J.  W.  Perkins,  Personal $393.00 

O.  C.  Nelson,  Personal 282.00 

To  adjust  partners'  interest  on  their  investment. 

The  next  entry  would  be  to  close  the  partners'  Personal  accounts  into  their 
Capital  accounts: 

J.  W.  Perkins,  Capital $:507.00 

O.  C.  Nelson,  Capital   108.00 

J.    W.    Perkins.    Personal $307.00 

O.   C.   Nelson.   Personal    1 68.00 

To  close  the  partners'  Personal  accounts  into  their  Capital  accounts. 

Note:  The  student  should  open  the  Capital  accounts  and  the  Profit  and  Loss  account, 
as  in  "A  Study"  in  Proposition  No.   t.  t..  see  lew  the  above  amounts  are  obtained,  which 

will   be   very  apparent  when  these   entries   are   posted. 

When  the  above  entries  are  posted.  O.  C.  Nelson.  Capital,  will  show  a  debit 
el'  $168  and  a  credit  of  $5,000  or  a  net    worth  at   present   of  $4,832.     Then   Mr. 


no  BOOKKEEPING  AM)  ACCOUNTING 

Perkins  should  pav  him  $2,000  cash  and  irive  him  a  60-day  note  .'it  ii',   interesl 
for  $2,832.    The  miry  is: 

0.  C.  Nelson,  Capital   $4,832.00 

Cash     $2,000.00 

Notes  Payable 2,832.00 

To  pay  for  the  interesl  of  0.  C.  Nelson  and  to  close  his  Capital  account. 

But,  suppose  Mr.  Nelson  should  agree  to  lake  $4,000  in  cash  for  his  interest. 

Then  a  payment  of  $4,000  must  cancel  his  interest  and  close  his  Capital  account, 
and  the  $832  would  belong  to  Mr.  Perkins.    In  that  case,  the  entry  would  be: 

O.  C.  Nelson.  ( lapital $4,832.00 

Cash    $4,000.00 

.1.  W.  Perkins.  Capital 832.00 

Again,  suppose  on  the  other  hand.  J,  \V.  Perkins  agrees  to  pay  0.  C.  Nelson 
$6,832  for  his  interest.  It  is  evident  then  that  both  partners  consider  the  busi- 
ness worth  more  than  the  tangible  assets,  from  the  fact  that  the  established 
organization  and  reputation  of  the  business  will  materially  help  to  earn  profits 
in  the  future.  This  intangible  asset  raises  the  question  of  value  of  the  Good- 
will of  the  Business  and,  in  this  case,  establishes  its  value.  It  is  represented 
in  the  books  by  an  account  called  "Goodwill."    The  entry  now  would  be: 

O.  C.   Nelson.  Capital    $4,832.00 

Goodwill    2.1)00.0(1 

Cash    $6,832.00 

To  (dose  O.  C.  Nelson,  Capital,  and  set  up  the  account  "Goodwill,"  to  repre- 
sent the  excess  paid  ahove  his  interest  shown  by  the  I ks. 

89.  Goodwill:  While  the  question  of  "Goodwill"  is  more  frequently  con- 
sidered and  its  value  recorded  in  corporation  bookkeeping,  it  has  already  been 
shown  that  it  may  arise  in  an  individual  or  a  partnership  business.  When  an 
individual,  firm  or  corporation  has.  during  a  period  of  years,  established  a 
reputation  for  fair  dealing,  standard  quality,  and  the  scrupulous  fulfilling  of 
obligations  to  the  extent  that  the  confidence  of  customers  means  thai  they  will 
not  only  continue  to  be  customers,  but  their  good  report  will  bring  other  cus- 
tomers, there  is  an  asset  created  which,  though  intangible,  tvill  produce  profits 
and  is  of  value  as  a  real  asset.  It  is  recognized  by  the  courts,  by  merchants 
and  by  accountants  as  a  Legitimate  asset.  It  is  a  fixed  asset,  more  fixed  than 
other   fixed   assets,  because  other   fixed   assets   ma\    be   sold   without    disturbing 

the  business,  while  the  assel  "Goodwill"  cannot  be  sold  without  selling  the 
business.    Goodwill  may  also  be  created  by  the  location  of  a  business  on  a 

crowded    corner,    or   a    franchise   or   a   legal   or   partial    business   monopoly   that 

will  produce  profits  that  cannot  be  realized  by  a  business  not  having  these 
advantages. 

No  hard  and  fast  rule  can  be  given  that  will  apply  to  any  and  every  busi- 
ness for  the  establishment  of  the  value  of  the  Goodwill.  The  conditions, 
prospects  and  surrounding  circumstances  must  he  considered.  '1'he  ordinary 
way  of  determining  the  value  of  Goodwill  is  to  appraise  it  upon  the  basis  of 
what  is  known  as  the  "Purchase  of  a  number  of  years  of  the  average  net 

profits  of  the  business."'  The  net  prolit  in  this  ease  is  usually  understood  to 
be  "the  net  prolit  of  the  business  less  seme  rate  per  cent  of  interest  on  the  net 
Capital  invested  each  year. 


BOOKKEEPING  AND  ACCOUNTING  111 

Suppose  that  the  net  investment  of  the  Glass  &  Bryant  Mercantile  Co 
was  $20,000  during  1919,  $22,500  for  1920,  and  $25,000  for  1921,  and  that  the 
Del  profit  shown  by  the  books  for  these  years  was  as  follows:  $3,100  for  1919, 
$3,800  for  1920,  and  $4,350  for  1921,  and  it  is  proposed  to  pay  five  years  of  the 
average  net  profit  for  the  Goodwill  of  the  business,  thai  is,  five  times  the 
average  net  profit  for  three  years. 

Assume  6%  to  be  a  fair  rate  of  interest  on  the  investment  for  each  year, 
then : 

The  net  profit  for  1919  is $3,100 

Less  interest  on  $20,000  at  6%  for  1919  is  1,200     net  $1,900 

The  net  profit  for  1920  is $3,800 

Less  interest  on  $22,500  at  6%  for  1920  is  1,350     net  $2,450 

The  net  profit  for  1921  is  $4,350 

Less  interest  on  $25,000  at  6< ,    for  1921..  1,500     net  $2,850 
The  total  net  profit  for  three  years  $7,200 

$7,200  divided  by  3  is  $2,400.  the  average  net  profit  per  year.  Then  if  five 
times  the  average  net  profit  is  paid  for  the  Goodwill,  the  value  is  5  times  $2,400 
or  $12,000,  the  value  of  the  Goodwill. 

90.  In  some  cases  depreciation  on  plant  and  machinery  and  equipment  have 
been  deducted,  and  a  higher  rate  of  interest  on  the  investment  applied.  In  a 
trading  company  one  to  five  times  the  average  net  profit  is  considered,  depend- 
ing upon  circumstances  peculiar  to  each  case.  In  manufacturing  concerns  one 
to  four  times,  for  a  professional,  one  to  three  times,  and  for  some  other  lines. 
much  more.  The  ability  to  transfer  the  Goodwill  that  may  exist  must  also 
be  considered,  as  well  as  the  time  for  which  it  would  naturally  be  effective  in 
the  producing  of  profits.  In  employing  the  foregoing  method  of  appraising 
the  value  of  the  Goodwill  of  a  business,  it  may  be  found  that  this  asset  dues 
not  exist  or  that  its  value  is  not  of  sufficient  consequence  as  to  be  worth  con- 
sidering. 

91.  The  question  has  been  raised  as  to  whether  or  not  the  fixed  asset.  "Good- 
will" should  be  written  off  in  the  same  way  as  depreciation  on  building  or  ma 
chinery.  It  is  suggested  by  some  accountants  thai  where  "Goodwill"  has  been 
based  upon  the  purchase  of  a  number  of  years  of  the  average  net  earnings,  or 
by  the  purchase  of  a  number  of  years  of  the  excess  earnings,  it  should  be  writ- 
ten off  within  the  same  number  of  years.  Opinions  differ,  and  other  account- 
ants contend  that  "Goodwill"  once  properly  entered  on  the  books  at  its  cost, 
should  continue  at  the  original  value. 


112 


HOOKKKKPIXCi    AND  k(  (  0UNT1NG 


PROBLEM  12.     POWERS  &  WILLIAMS.     A  PARTNERSHIP 

At  the  close  of  business  December  31,  a  three  month  period,  the  Ledger 
of  Powers  and  Williams  showed  the  follov  ounts.     The  partners  share 

profits  and  bear  losses  in  proportion  to  their  investments.  Copy  these  accounts 
..n  ledger  paper,  giving  each  accounl  eight  lines,  and  after  providing  for"  the 
inventories  thai  follow,  prepare  a  Pinal  Trial  Balance  before  Closing,  Balance 
sheet,  Profil  and  Loss  Statement,  and  close  the  Ledger,  (lose  each  partner's 
Personal  account  into  his  Capital  account,  and  eredil  each  partner's  Capital 
ace, Mint  for  his  share  of  the  net  profit,  by  journal  entry.  Refer  to  the  steps  sug- 
gested n.  Prohlem  9,  or  use  the  Working  Sheet. 


W.  .1.  Towers.  ( 'apital 


Oct.  25      151 10.00 


Oct. 


l     !i;,i)ii.tiu 
in    1000.00 


W.  J.  Powers,  Personal 


Oct.    5       150.00 
12         50.75 


Oct.  15         38.50 


X.  M.  Williams.  Capital 


Oct.  25      1." .00 


Oct.    1      5500.00 
10      1000.00 


X.  M.  Williams,  Personal 


Oct.    8 
16 


175.00 
37.50 


Oct.  18 


40.25 


Cash 


Dec.  31 

6875.00  || 

(  M'lice    fixtures 

Oct.  1 

750.00  || 

Notes  Receivable 

1  tec.  30 

7675.00  || 

Notes  Payable 

||  Dec.  31     4285.00 

Accounts  Receivable 

Dee.  31 

5692.00  || 

Accounts  Payable 

||  Dec.  31     2850.00 

Xot 

is  Receivable  Discounted 

Dec  15     2000.00 


Merchandise  Inventory 


Oct.  1       5760.00 


Purchases 


Dec.  31     12075.1111       Dee    31  350.00 


Purchases  Discount 


Dec.  31       285.00 


Preighl  Tn 


Dee.  31        290.00  | 


Sales 


Dee 

31 

360.00  I1  Dee.  31  18697 
Sales  Discount 

50 

1  >ec 

31 

125.00  || 

Administrative  Expense 

Dec. 

31 

H2H.00  || 
Selling  Expense 

Dec. 

31 

740.00  || 
Freight  Out 

N 1 1  v 

18 

127.50  || 

Interest  and  Discount 

Oct. 

1 

36.00       Dec.  31         12 
Insurance 

50 

Oct.  1 


120.00 


BOOKKEEPING  AND  ACCOUNTING  113 

Inventories : 

Merchandise  Inventory,  Dec.  31 $5985.00 

Insurance  Expired 40.00 

Accrued  Assets : 

Interest  accrued  on  Notes  Receivable $36.50 

Accrued  Liabilities : 

Unpaid  office  help  for  half  week $180.00 

Unpaid  Wages,  Sales  Dept 195.00 

Interest  accrued  on  Notes  Payable 56.75 

Deferred  Charges  to  Operation : 

Postage  and  office  supplies  on  hand $  65.40 

Advertising  matter  on  hand 125.00 

Depreciation : 

8%  Depreciation  on  Office  Fixtures $60.00 

Reserve  for  Doubtful  Accounts: 

5%   of  Accounts  Receivable $284.60 

Note:  The  "Freight  Out"  account  is  a  Profit  and  Loss  account,  not  a 
trading  account.  (See  34b).  It  belongs  in  the  Operating  Expenses  in  the 
Profit  and  Loss  Statement.  This  problem  may  be  worked  out  using  the  Work- 
ing Sheet  as  in  Problem  6,  or  by  following  instructions  in  paragraphs  27  to  40 
inclusive,  except  that  there  are  no  detailed  statements  nor  schedules  required 
to  be  made.  Notes  Receivable  Discounted  should  appear  in  the  Balance  Sheet 
as  a  deduction  from  Notes  Receivable  on  the  Asset  side.  Refer  to  Suggestions 
in  Problem  9. 

PROBLEM  13.     TRIAL  BALANCE  AND  STATEMENTS  FOR  A  CORPORATION. 
ROGERS  AND  BALDWIN  HARDWOOD  CO.,  INCORPORATED 

The  net  profits  of  a  corporation  are  ascertained  in  the  Profit  and  Loss  State- 
ment the  same  as  in  the  business  of  a  sole  proprietor  or  a  partnership,  but  the 
distribution  of  the  net  profits  in  a  Corporation  is  different.  The  student  is 
already  familiar  with  the  method  of  crediting  the  proprietor  for  the  net  profit 
at  the  end  of  a  period,  and  the  crediting  of  each  partner  with  his  share  of  the 
profit  in  a  partnership.  Naturally,  if  the  business  showed  a  loss,  the  debit  side 
of  the  Profit  and  Loss  account  would  be  greater  than  the  credit  side,  and  the 
difference  (the  loss)  would  be  debited  to  the  Capital  account  instead  of  credited. 

In  a  corporation,  if  all  the  profits  were  declared  as  dividends  and  distributed 
(by  payment  to  the  stockholders!,  the  entire  profits  would  be  drawn  out  of  the 
business  and  the  corporation  would  be  in  no  better  financial  condition,  after 
years  of  successful  operation,  than  at  the  beginning,  hence  the  necessity  for 
withholding  some  part  of  the  profits  at  the  end  of  each  period,  by  setting  up 
reasonable  reserves  and  by  carrying  a  part  as  Surplus.  Depreciation  and 
deterioration  should  be  amply  provided  for  and  this,  of  course,  takes  part  of 
the  profits. 

The  portion  of  the  net  profits  for  any  period  that  the  Board  of  Directors  of 
the  corporation  may  decide  shall  be  paid  to  stockholders  is  called  a  "divi- 
dend." The  stockholders  are  not  entitled  to  any  dividends  until  the  Board  of 
Directors  have  met  according  to  the  by-laws  and  have  by  vote  declared  that  a 
certain  per  cent  of  the  par  value  of  the  Capital  stock  shall  be  paid  to  the  stock- 
holders.    Of  course,  the  dividend  would  apply  only  to  the  stock  issued. 

"When  a  dividend  is  declared,  a  journal  entry  is  necessary  to  set  up  the  divi- 
dend account.  Usually  the  net  profit  shown  by  the  Profit  and  Loss  account  is 
transferred  to  a  Surplus  account,  by  journal  entry,  then  the  journal  entry  to 


Ill 


l'.ooKKKKIMXC  AND  ACCOUNTING 


set  up  the  dividend  accounl  would  be,  debil  "Surplus"  and  credit  "Dividend 
No.  1"  (or  whatever  number  il  maj  be)  for  the  amounl  of  the  dividend  declared 

From  the  following  Trial  Balance  of  Rogers  &  Baldwin  Hardware  Co.  for 
the  six  month  period  ending  June  30,  192  .  prepare  a  Balance  Sheet  and  Profit 
and  Loss  Statement. 

Trial   Balance,    Rogers   &  Baldwin  Hardware   Co.    Jnne   30,    192 


Capital   Stock    

Unsubsoribed   Stock      

Surplus        

Cash 

Petty   Cash      

Notes   Receivable      

Accounts   Receivable    

Insurance        

Motes  Payable  

Accounts  Payable   

Building   

Mortgage  Payable   

Office  Equipment   

Store  Fixtures   

Delivery  Equipment  

Merchandise  inventory,  Jan.  1 

Furohases  

Furohases  Disoount   

Purchases  Returned  and  Allowances 

Freight  In   

Sales   

Sales  Returns  and  Allowances 

Sales  Disoount   

Administrative  Expense   

Freight  Out  

Wages,    sales   Dept 

Salesmena'    Salaries    

Traveling  Expenses      

Advertising   

Warehouse  Expense    

Delivery  Expense      

Offioe   Equipment   Expense      .... 

Store  Fixtures  Expense      

Building  Expense  and   Income    .    .    . 
Interest  and  Discount    


2000 

11350 

80 

9875 

13987 

360 


15000 

1750 

2875 

2250 

12720 

59547 


735 

429 

397 

5495 

526 

1750 

2250 

1000 

950 

375 

750 

93 

175 


146768 


00 

75 

00 
00 
50 
00 


00 

00 
00 
00 
85 
25 


90 

70 

50 
20 
40 
00 
00 
00 
00 
80 
00 
75 
00 

50 


10 


25000 
3500 


15000 
17100 

6000 


764 
643 

76413 


32  7 


146768 


00 


00 


00 

00 

00 


30 
25 

05 


50 


10 


Inventories  or  Supplementary  Facts  are  as  follows: 

Merchandise  Inventory  .Inn,.  30,  1!»:2    $18,408.65 

Insurance  expired 1- 

Accrued  Assets ; 

Interest   Accrued  on   Notes  Receivable '      $13.25 

Warehouse  rent  paid  in  advance 50.00 

Renl  due  on  offices  in  building 5  t.58 

Accrued  Liabilities: 

Unpaid  freighl  bills  on  goods  purchased,  not 

taken  up $325.60 

Interest  j rued  on  Notes  Payable 12.50 


BOOKKEEPING  AND  ACCOUNTING 


115 


Interest  accrued  on  Mortgage  Payable 

Unpaid  wages,  Sales  Dept 

Unpaid  office  help 

Unpaid  delivery  drivers 

Deferred  Charges  to  Operation: 

Postage  and  office  stationery  on  hand 

Advertising  matter  on  hand 

Depreciation : 

5%  on  Office  Equipment 

5%  on  Store  Fixtures 

8%  on  Delivery  Equipment 

1 ' ,    on  Building   

Reserve  for  Doubtful  Accounts : 

5' ,   of  Accounts  Receivable 

For  Deterioration  on  value  of  goods  on  hand. . 

The  following  Working  Sheet  shows  the  adjustment  of 
which  are  not  found  of  record  in  the  books.    The  journal  entr 
above  facts  in  the  books  may  be  prepared  from  the  above  or 
nient  columns  of  the  following  sheet. 


22.50 
375.0(1 
250.00 

37.50 

$127.5(1 
239.80 

$  87.50 
143.75 
180.00 
150.00 

$567.54 
725.60 

the  above  facts 
ies  to  record  the 
from  the  adjust- 


'.Torklng  sheet,  Rogers  &  Baldwin  Hardware  Co.  June  30.  192 


Capital  Stook  

r/nsubsorlbed  stook      

Surplus   

Caah    ^.  .  .  . 

Petty  Cash   

notes  Receivable   

Accounts  Receivable  

Insurance  

notes  Payable  

Aooounts  payable   

Building  

mortgage  Payable   

Office  Equipment   

Store  Fixtures   

Delivery  Equipment   

lidse .  Inventory.  Jan.  1 

Furohases - 

Furohases  Discount   

Purohaeee  Returned  and  Allowances 

Freight  in _.  .  .  . 

Sales   '.  .  .  . 

Sales  Returns  and  Allowances   .  . 

Sales  Dlsoount   

Administrative  Expense   

Freight  Out  

Waged,  Sales  Dept 

Salesmens'  Salaries  

Traveling  Expenses   

Advertising  .....  

Warehouse  Expense  .  

Delivery  Expense   

Offlae  Equipment  Expense   .  .  .  . 

Store  Fixtures  Expense   

Building  Expense  and  Inoome  .  .  . 

Interest  and  Dlsoount   

Loss  on  Doubtful  Aooounts  .  .  .  . 

Accrued  Assets   

Aoorued  Liabilities  

Deferred  Charges  to  Operation  .  . 
Res.  for  Dep.  on  Offloe  Equipment 
Ree .  for  Dep.  on  store  Fixtures 
Res.  for  Dep.  on  Delivery  Equip. 
Res.  for  Dep.  on  Building  .  .  .  . 
Res.  for  Doubtful  Aooounts   .  .  . 


Trial  Balanoe 
Dr.         Cr. 


20C0 

11350 

80 

9675 

13967 

'360 


15000 

1760 

2675 

2250 

12720 

59547 


735 

429 

397 

5496 

526 

1750 

2250 

1000 

950 

375 

750 

93 

175 


15000 
17100 


764 
643 


1011  146766 


15 


Adjustments 
Dr .        C  r . 


661 
375 


150 

35 

667 

117 

367 


■JBTT 


239 
50 


1023 

87 
143 
180 
150 
567 


2817 


oO 


Final  Trial  Balanoe 
Dr.  Cr. 


11350 

80 

9875 

13987 

ISO 


1750 

2675 

2250 

12720 

59547 


429 

397 

6028 

526 

2125 

2250 

1000 

710 

326 

967 

93 

176 

64 
667 
117 


148824  57 


3600 


15000 
17100 


784 
643 


1023 

87 
143 
180 
150 
667 


ILLUSTRATION   NO.    59.      WORK    SHEET.      CORPORATION 

Xote:  Two  more  columns  may  be  added  to  this  Working  Sheet  for  Profit  and  Loss  and 
the  gains  and  losses  transferred  to  these  columns,  from  which  the  closing  journal  entries 
could  be  prepared,  but  the  closing  journal  entries  are  usually  prepared  from  the  Profit  and 
Loss  Statement  or  the  Nominal  Accounts  of  the  Ledger. 


116  BOOKKEEPING   AND  ACCOUNTING 

Prepare  the  Balance  Sheet  and  Profil  and  Loss  Statemenl  from  the  "Final 
Trial  Balance"  columns,  using  the  present  merchandise  inventory,  $18,41  - 
The  deterioration  of  stock  $725.60  is  simply  deducted  from  the  Merchandise 
Inventory,  leaving  the  Merchandise  Inventory  $17,683.05  to  bi  <  the  Bal- 
ance Sheel  and   Profit  and   Loss  Statement.     It   is  necessary  to  set  up  a 

reserve  Por  deterioration. 

The  Following  journal  entries,  when  posted,  will  record  the  supplementary 
Facts  in  the  books,  as  shown  in  the  Adjustment  columns. 

Administrative   Expense  $180.00 

Insurance  -n.00 

—30— 

1  Assets  $117.{ 

Interest  and  D  - 13.23 

Warehou  e    Expense    50.00 

Building  Expense  :m<l   Income 54.58 

—30— 

Freight  In 

Interest   and  Discount 35.00 

Wages,  Sales  Dept 375.00 

Administrative   Expense  250.00 

ivery   Expense  37.50 

ed    Liability  9  23.10 

—30— 

Deferred  Chargi     to  1  iperat  ion $367.30 

Administrative  Expense  $127.50 

Advertising    

—30— 

Administ  rat  ive  Expense £-3 1.25 

Delivery    Expense  I8O.1 

Building  Expense  and   Income 150.00 

Resen  <•  for  I  >ep.  on  <  tffice  Equip -    -  7.50 

Reserve  for  Dep   on  Store  Fixtures 1  !.;.7."> 

Reserve  for  Dep.  on   Delivery  Equip 180 

Resen  e  for  Dep.  on  Building 150.00 

—30— 

Loss  on  Doubtful  Accounts 

Reserve  for  Doubtful  Account  s $567  5  ! 


BOOKKEEPING  AND  ACCOUNTING 


117 


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BOOKKKKlMXi;  AND  ACCOUNTING 


Profit  and  Lose  Statement,  Rogers  &  Baldwin  Hardware  Co.  June  30.  192 


J18408.65 
725.60 


Less  Sales  Returns  $429.70 

"   Sales  Dlsoount  397 .PC 

Bet  Sales 

Cost  of  Sales: 

Kerohandise  Inventory,  Jan.  1 

Purchases  159547.25 

Less  Purchases  Returns   $643.25 

"   Purohaaea  Dlsoount   784-30    1427.55 
Add  Freight  In 

Total  cost  of  Merchandise 

Leas  Mdae.  Inventory,  June  30 
Less  Res.  for  Deterioration 
Cost  of  Merohandlse  sold 
Gross  Profit  on  sales 

Operating  Expenses: 

Administrative  Expense 

Selling  Expense: 
Freight  Out 
Wages,  Sales  Dept . 
Salesmens'  Salaries 
Traveling  Expenae 
Advertising 
Warehouse  Expense 

Total  Selling  Expense 
Delivery  Expense 
Office  Equipment  Expenae 
Store  Fixtures  Expense 

Total  Operating  Expense 
Ket  Profit  on  Salea 

Other  Inoome: 

Building  Expense  and  Income 


Deductions  from  Income: 
Interest  and  Discount 
Loss  on  Doubtful  Accounts 

Net  Profit  or  Income 
Carried  to  Surplus 


76413 
827 


12720 


58119 
1061 


17683 


|526.40 
2125.00 
2250.00 
1000.00 
710.20 
325-80 


6028 


6937 

967 

93 

175 


BS 


OS 


9E 


64 
567 


25 
54 


75585 


54218 


B£ 


CO 


14202 


7164 


232 


7396 


631 


6764 


60 


08 


.-.' 


79 


S3 


ILLUSTRATION    NO.    01.       PROFIT    AM)    Loss    STATEMENT.      CORPORATION 


Tlic  student  will  sel  up  the  Trading  ami  Profit  anil  Loss  accounts  shown  in 
the  Final  Trial  Balance  and  close  them  into  a  Profil  ami  Loss  account,  then 
transfer  the  net  profit  to  Surplus  account,  by  journal  entr\ . 

The  board  of  directors  have  declared  a  ten  per  cent  dividend.    Prepare  and 
post  a  journal  entry  to  set  up  the  dividend  ace. .unt.  which  call  "  Dividend  No.  1 " 
as  if  it  were  the  firsl  dividend  t<>  lie  paid.     Read  Corporation  Accounting,  para 
graph  123. 


CHAPTER  VI 
CONTROLLING  ACCOUNTS 

Empire  Grocer  Company,  Wholesale 
A  Corporation 

92.  The  books  to  be  used  are  Purchases  Book,  Sales  Book,  Journal,  Cash 
Book,  Petty  Cash  Book,  General  Ledger,  Sales  Ledger,  and  Purchases  Ledger. 
The  first  four  books  are  the  books  of  original  entry.  The  Petty  Cash  Book  is 
not  used  as  a  book  of  original  entry. 

93.  The  purpose  of  this  set  is  to  illustrate  the  controlling  accounts.  The 
Accounts  Receivable  account  in  the  General  Ledger  controls  the  Sales  Ledger. 
The  Accounts  Payable  account  controls  the  Purchases  Ledger.  The  Petty  Cash 
account  controls  the  Petty  Cash  Book  or  petty  cash  fund,  kept  in  the  cash 
drawer  to  pay  sundry  cash  expenses.  The  purpose  of  a  controlling  account  is 
to  eliminate  a  certain  class  of  accounts  from  the  General  Ledger.  Here  cus- 
tomers' accounts  are  taken  out  of  the  General  Ledger  and  kept  in  the  Sales 
Ledger  which  is  controlled  by  "Accounts  Receivable"  account.  Creditors' 
accounts  are  kept  in  a  Purchases  Ledger  which  is  controlled  by  "Accounts  Pay- 
able" account. 

94.  If  the  number  of  customers'  accounts  were  500  to  1.500  or  more,  it  would 
be  quite  a  task  and  require  much  time  to  prepare  a  trial  balance  at  the  end  of 
each  month.  But  if  all  those  customers'  accounts  are  kept  in  a  "Sales  Ledger" 
and  the  total  of  all  of  them  is  represented  under  one  account  in  the  General 
Ledger,  "Accounts  Receivable"  the  trial  balance  can  be  taken  from  the  Gen- 
eral Ledger,  and  the  work  of  going  over  this  large  number  of  accounts  in  the 
Sales  Ledger  is  eliminated. 

95.  Accounts  Receivable:  Using  the  Sales  Ledger  eliminates  all  customers' 
accounts  from  the  General  Ledger,  and  the  total  of  what  all  customers  owe  is 
shown  by  "Accounts  Receivable"  account  in  the  General  Ledger.  This  account 
controls  the  Sales  Ledger.  At  the  end  of  each  month,  the  total  of  the  Sales 
Book  is  posted  to  the  credit  of  "Sales"  account  and  also  to  the  debit  of  "Ac- 
counts Receivable"  in  the  General  Ledger,  because  this  is  the  total  of  all  debits 
to  customers'  accounts  in  the  Sales  Ledger.  Now.  the  Accounts  Receivable 
account  and  the  Sales  Ledger  agree,  if  no  payments  have  been  made  by  cus- 
tomers, and  no  allowances  have  been  made  to  them. 

96.  What  customers  pay  in  cash  and  notes  or  acceptances  and  what  is 
allowed  them  in  discounts  or  other  allowances,  must  be  credited  to  "Accounts 
Receivable"  account  because  these  are  credited  to  the  Customers'  account  in 
the  Sales  Ledger,  then  the  Accounts  Receivable  account  and  the  Sales  Ledger 
will  always  agree.  This  is  the  sense  in  which  the  Accounts  Receivable  account 
controls  the  Sales  Ledger.  In  order  to  get  these  credits  properly  recorded  to 
the  credit  of  Accounts  Receivable,  special  columns  for  Accounts  Receivable 
are  used  in  the  Cash  Book  and  Journal. 

97.  Accounts  Payable:  Using  the  Purchases  Ledger  (Creditors'  Ledger) 
eliminates  the  accounts  of  all  creditors  (persons  and  firms  from  whom  we  buy 
merchandise)  from  the  General  Ledger,  and  the  total  we  owe  all  creditors  is 
represented  by  "Accounts  Payable"  account  in  the  General  Ledger.  This 
account    controls   the    Purchases   Ledger   the   same   as   Accounts   Receivable 

119 


120 


BOOKKEEPING   AM)  A<  COUNTING 


a< uni  controls  the  Sales  Ledger.     At  the  end  of  the  month,  the  total  of  the 

Purchases  Book  is  posted  to  the  debil  of  "Purchases"  account,  and  also  to  the 
credil  of  "Accounts  Payable"  in  the  General  Ledger,  because  this  is  the  total 
of  all  credits  to  creditors  in  the  Purchases  Ledger.     Now.  the  Accounts  Payable 

aec« t  and  the  Purchases  Ledger  must  agree,  if  no  payments  have  been  made 

to  creditors  and  no  allowances  received  from  them.    What  we  paj  "cash 

aqd  Notes  Payable,  and  what  we  receive  in  discounts  and  other  allowances  are 
ed  to  tli>'  creditors  in  the  Purchases  Ledger,  and  musl  be  debited  to  Ac 
cmints  Payable  in  the  General  Ledger.     In  ordi  these  debits  properlj 

recorded  to  I"-  posted  to  Accounts  Payable,  special  columns  are  used  for 
Accounts  Payable  in  the  ('ash  Book  and  Journal. 

98  Petty  Cash:  A  Pettj  Cash  accounl  is  sel  up  to  control  the  petty  cash 
fund  to  be  kept  in  the  '-ash  drawer  to  pay  petty  expenses.  Decide  the  maximum 
amount  necessarj  to  be  kepi  in  the  '-ash  drawer,  ami  make  a  check  for  that 
amount,  which  charge  to  Pettj  Cash  accounl  mi  the  credil  side  of  the  Cash 
Book,  open  the  Petty  Cash  Book,  entering  tin-  amount  received.  Special 
columns  may  or  may  n<it  be  used  in  the  Petty  Cash  Book.  When  the  petty 
rash  fund  runs  low.  Hie  custodian  of  this  fund  presents  a  statement  showing 
the  amount  paid  mit  ami  the  differenl  kinds  of  expense,  ami  a  check  is  given 

for  the  amount   that   has  1 n  paid  out.  to  restore  this  fund  to  its  original 

amount.      These  different    expense  accounts  are  charged   <ui   the  eredit    side   of 

the  Cash   Book,  and  amount   t,,  the  same  ;is  tl heck  given  t.i  rest,, re  the  fund. 

The  Petty  Cash  Book  is  balanced  each  time  this  is  dune,  and  at  the  end  of  the 
month  feline  a  Trial  Balance  is  taken.  The  Petty  Cash  account  controls 
the  Petty  <  ash  Book  in  this  way. 


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rLLUSTRATION   NO.   MA.      PETTY  CASH    i 


BOOKKEEPING  AND  ACCOUNTING  121 

99.  Subsidiary  Ledgers:  There  may  be  any  Dumber  of  Sales  Ledgers, 
divided  according  to  States,  or  for  city  and  country,  or  divided  according  to  the 
alphabet,  with  a  bookkeeper  in  charge  of  each,  and  yet  the  Accounts  Receivable 
account  will  control  these  Ledgers.     An  Accounts  Receivable  account   may  be 

used  in  the  General  Ledger  to  control  each  Sales  Ledger,  and  the  I kkeeper 

in  charge  of  each  Ledger  must  prove  Ins  book  with  this  General  Ledger  account. 
The  purpose  is  to  eliminate  ttiis  work  from  that  of  the  head  bookkeeper  and  the 
general  bookkeeping.  The  Purchases  Ledger  may  be  subdivided  in  the  same 
way  as  the  Sales  Ledger  and  for  the  same  purpose. 

100.  Notes  Receivable  and  Notes  Payable:  Where  there  are  a  large 
number  of  trade  acceptances,  notes  and  ordinary  acceptances,  a  special  column 
in  the  Journal  is  used  for  "Notes  Receivable  Debit"  and  one  for  "Notes  Payable 
Credit."  and  the  totals  of  these  columns  is  posted  to  the  debit  of  "Notes  Receiv- 
able" and  to  the  credit  of  "Notes  Payable"  at  the  end  of  each  month.  The 
data  for  keeping  check  on  the  collection  and  payment  of  Notes  is  kept  in  the 
"Notes  Receivable"  and  •"Notes  Payable"  Book,  which  may  be  proved  against 
these  accounts  at  convenient  times.  In  many  lines  of  business,  these  special 
columns  would  be  unnecessary,  for  Notes  Receivable  and  for  Notes  Payable. 

101.  Other  Controlling  Accounts :  In  a  manufacturing  business,  "material" 
account  or  "Raw  Materials"  account  may  be  used  to  control  the  "Stores 
Ledger"  or  "Stock  Ledger;"  "Direct  Labor"  account  to  control  the  cost  of 
labor  expended  directly  in  the  process  of  manufacture;  "Factory  Expense"  to 
control  indirect  labor,  superintendence,  rent,  light,  power,  repairs,  supplies,  etc. 
as  ascertained  by  the  cost  system.  In  a  large  manufacturing  business,  other 
controlling  accounts  are  found  necessary.  The  principle  is  the  same  as  for  the 
controlling  accounts  in  a  mercantile  business. 

102.  The  illustration  of  these  books  of  original  entry  and  the  Ledger 
accounts  are  shown  here  in  order  to  show  the  postings  to  these  controlling 
accounts,  and  the  special  columns  necessary  when  several  Ledgers  and  con- 
trolling accounts  are  used.  The  set  is  short,  yet.  there  is  plenty  of  work  in  it, 
and  the  student  should  write  it  up  from  the  beginning.  Actually  doing  the 
work  and  posting  it  all,  is  the  only  thorough  method  of  study.  In  addition  to 
what  is  shown,  the  student  is  required  to  provide  for  all  the  inventories — sup- 
plementary facts  not  found  in  the  books — and  prepare  Trial  Balance,  Balance 
Sheet,  Profit  and  Loss  Statement,  and  reconciliations,  independently. 

BUSINESS  TRANSACTIONS 

le.  Sept.  1.  J.  D.  Melton,  R.  ('.  Palmer  and  T.  L.  James  have  incorporated 
the  Empire  Grocer  Company,  under  the  laws  of  the  State  of  Illinois,  with 
an  authorized  capital  of  $50,000,  divided  into  500  shares  of  the  par  value 
of  $100.  J.  D.  Melton  has  subscribed  for  2(10  shares  at  par,  and,  as  per 
agreement,  has  transferred  from  his  previous  business,  by  bill  of  sale. 
Office  Equipment,  $1,350,  Store  Fixtures,  $2,075,  and  Merchandise  Inven- 
tory, $14,687.50,  and  has  paid  the  remainder,  $1,887.50  in  Cash. 

In  consideration  of  Mr.  Melton's  knowledge  and  experience  in  the  busi- 
ness, R.  C.  Palmer  and  T.  L.  James  have  agreed  to  pay  $125  a  share  for 
their  stock,  or  $25  above  par,  and  have  subscribed  for  100  shares  each  at 
$125.  which  they  have  paid  in  cash.  Prepare  the  opening  entry.  (See 
illustration  of  the  Journal  and  read  Corporation  Accounting  following 
this  set).  This  leaves  100  shares  or  $10,000  of  the  Capital  Stock  unsub- 
scribed, and  creates  a  Surplus  of  $5,000. 

Note:  Enter  tTie  cash  in  the  Cash  Bock  and  check  the  item.  Post  tliis  opening 
entry  and  prepare  a  Balance  Sheet  from  the  Ledger.  Usually  upon  opening  a  new 
set  of  books,  especially  if  there  are  several  items,  a  Balance  Sheet  is  prepared  to 
show  the  Ledger  is  in  balance,  and  to  show  the  condition  of  the  business  at  beginning. 
This  is  submitted  to  the  management  for  their  information. 


122  BOOKKEEPING  AND  ACCOUNTING 

2c.  s,.pt.  1.     Gave  J.  M.  Brown  a  check  Eoi  <■  rent  of  store  building  Eor 

one  month.     (Administrative   Expense  .     Paid   Moon   Printing  Co.  v17.. 
for  printing  advertising  matter.       Selling  Expense).     Received  Cash 
sundry  retail  sales,  $435.25.     (Credit  "Sales"  accounl  on  the  debil  side 
of  the  Cash  Book,  in  Sales  column  . 

3c.  Sept .  1.  It  has  been  decided  thai  the  maximum  amounl  of  cask  necessary 
to  be  kept  in  the  cash  drawer  Eor  petty  expenses  is  $75.  Give  a  check  Eor 
$75  to  sel  up  tli.'  Petty  Cash  account.  Open  the  Petty  Cash  I'.--  with 
three  special  columns.  See  illustration.  Debil  Petty  Cash  accounl  on 
i  be  credil  side  of  the  <  lash  Book. 

4e.  Sep1  2.  Boughl  2  One-ton  Delivery  Trucks  (g  $750  each  for  cash  from 
the  Centra]  Motor  Co.  Paid  Office  Supply  Co.  $182.75  Eor  blank  books 
ami  office  stationery.     (Administrative  Expense 

5c.  Sept.  2.  Paid  From  petty  cash  Eund:  Carbon  paper,  $3.25,  and  postage, 
$12.50.     Order  books  Eor  salesmen,  $5.35,  and  Form  Sales  Letters,  $6.75 

F.nter  in  Petty  Cash  Book  . 

Sepl  2.  Sold  to  W.  I..  Mason  &  Co.,  Louisville.  Kv..  2  15,  a  60,  125  brls. 
<;.  Flour  in  $8.75.  150  brls.  Early  Potatoes  m  $4.75. 

Sold  to  L.  D.  Miller.fi  Son.  Bvanston,  111..  2  15,  n  60,  95  brls.  II.  Apples 
@  $4.35,  85  brls.  Sweel   Potatoes  (§   $5.25. 

7c.  Sept.  3.  Purchased  of  Central  Milling  Co.,  St.  Louis.  Mo.,  merchandise 
as  per  Invoice  No.  1.  3  30,  n  90,  $2,675.85.  Purchased  of  Horace  &  Mann. 
St.  Paul.  .Minn.,  merchandise  as  per  Invoice  No.  2,  3  30,  □  90,  $2,263.75. 

8c.  s,pt.  |.  Received  a  check  for  $842.31  from  L.  I).  Miller  &  Son  to  pay  bill 
of  Sept.  2,  in  full  allowing  2* ,  discount.  Received  £597.80  Eor  sundry  cash 
sales. 

9c.  Sept.  5.  Cave  Central  Milling  Co.  a  15  day  trade  acceptance  for  $2,595.57 
and  received  '■'>',  discount  on  tnvoice  No.  1.  for  payment  in  full.  Gave 
Horace  \  .Mann  a  check  for  $2,195.84  to  pay  Invoice  No.  2  in  full,  deduct- 
ing %%   discount  as  per  terms. 

10c.  Sept.  6.  Sold  Jones  &  (lark.  Cairo.  111..  2  15,  n  60,  325  bx.  Silver  Prunes 
@  $4.25,  l'7o  cs.  Glucose  Syrup  (a  $4.15. 

Sold  to  Ilartman  Bros.,  Atlanta,  Ga.,  2  15,  n/60.  47.">  doz.  O'Meal 
Crackers  (n  $4.75,  245  bx.  D.  Peaches  a  $4.25. 

Sold  to. I.  1).  Morton.  Lansing,  Mich.,  .2  15.  n  tin.  125  cs.  Butter  Prints 
5.000  lbs.  (a  37y2c,  135  cs.  c [or  Coffee  (§  $7.50. 

lie.  Sept.  0.  Post  the  books  to  date,  and  ascertain  the  cash  balance.  The 
Sales  1  liscounl  column  on  the  debit  side  and  the  Purchase  Discounl  column 
on  the  credit  side  of  the  ( 'ash  Book  are  omitted  iii  figuring  the  cash  ha  la  ncc. 
The  items  in  these  columns  are  not  cash.  A. id  the  first,  second  and  fourth 
columns  on  the  del. it.  and  deduct  the  total  of  the  first,  Second,  fourth  and 
fifth  columns  on  the  credit  side. 

Total  all  the  columns  on  each  side  in  light  pencil  figures  dose  under 
the  line  of  tin-  last   entry  on  each  page  so  they  will  be  out   of  the  way  n\ 

tlie  next  entry,  then  use  these  pencil  Footings  as  explained  above.     Do 

not  erase  the  pencil  figures,  as  they  will  save  addition  next  time  Of 
course  the  EootingS  of  the  special  columns  an-  not  to  be  posted  until  the 
end   oft  he   month. 

12c.  Sept.  8.  Purchased  of  W.  J.  Wilson  £  Co..  Atchison.  Kan.,  merchandise 
as  pei-  [nvoice  No.  3  □  90,  $4,693.25.     Purchased  of  Valley  Trading 

Co..  Peoria.  III.,  merchandise  as  per  Invoice  No.   I.  3  30,  n  90,  $4,327.60 


BOOKKEEPING  AND  ACCOUNTING  12:3 

Purchased  of  Snyder  &  Baker,  Chicago,  111.,  merchandise  as  per  Invoice 
No.  5,  3,  30,  n,  90,  $3,682.75. 

13c.  Sept.  8.  Paid  from  Petty  Cash  fund:  Oil,  .+6.50,  Gasoline  for  Trucks. 
$7.25,  Postage,  $10.00,  Office  Supplies,  $3.50.  For  extra  help  on  Delivery 
Truck,  $2.50.     (Enter  in  Petty  Cash  Book.) 

14c.  Sept.  9.  The  statement  from  the  Petty  Cash  fund  shows  the  following 
payments:  Delivery  Expense,  $16.25,  Administrative  Expense.  $29.25, 
Selling  Expense,  $12.10.  (See  Petty  Cash  Book.)  Gave  a  check  for  the 
total  of  these  expenses  to  restore  the  Petty  Cash  fund.  Debit  these 
expenses  on  the  credit  side  of  the  Cash  Book,  and  balance  the  Petty  Cash 
Book. 

15c.  Sept.  9.  Paid  Acme  Furniture  Co.  $92.50  for  repairing  and  revarnishing 
office  desks.  Paid  J.  B.  Carpenter  $67.85  for  adjusting  store  fixtures. 
Paid  J.  C.  Burns  Insurance  agency  $480,  Premium  on  Insurance  Policy 
on  stock  of  goods  for  one  year  from  September  1. 

16c.  Sept.  10.  Received  $18.75  refund,  from  Moon  Printing  Co.  on  bill  of  Sept. 
1,  on  account  of  error.  (Credit  Selling  Expense  on  the  debit  side  of  the 
Cash  Hook.)  Received  $21.75  refund  from  the  Office  Supply  Co.  on  bill 
of  Sept.  2,  for  overcharge.  (Credit  Administrative  Expense  on  the  debit 
side  of  the  Cash  Book.)    Received  $746.25  for  sundry  cash  sales. 

17e.  Sept.  11.  Allowed  Jones  &  Clark  $138.75  for  damaged  goods  on  bill  of 
Sept.  6.  Returned  goods  to  Snyder  &  Baker  to  the  value  of  $368.75  for 
credit.  Received  a  15  day  trade  acceptance  for  $2,829.75,  dated  Sept.  6, 
from  J.  D.  Morton  on  account  and  allowed  2%  discount  on  bill  of  Sept.  6. 

18c.  Sept.  11.     Paid  from  Petty  Cash  fund  for  order  books  for  salesmen  $49.75. 

19c.  Sept.  12.  Received  $2,337.07  from  Jones  &  Clark  to  pay  their  balance  of 
$2,383.75  in  full,  allowing  2%  discount.  Received  $685.70  for  sundry  cash 
sales. 

20c.  Sept.  13.  Paid  W.  J.  Wilson  &  Co.  $4,552.45  in  full  for  Invoice  No.  3, 
deducting  3%  discount. 

21c.  Sept.  13.  Paid  office  help  for  two  weeks  $375.  Paid  sales  force  for  two 
weeks  $471.60.    Paid  delivery  drivers  for  two  weeks  $110. 

22c.  Sept.  13.     Post  the  books  to  date,  and  ascertain  the  cash  balance. 

23c.  Sept.  15.     Paid  C.  &  A.  R.  R.  Co.  $638.50  for  freight  on  goods  purchased. 

24c.  Sept.  16.  Received  $1,770.12  from  W.  L.  Mason  &  Co.  on  account  and 
allowed  2%  discount  for  payment  in  full  of  bill  of  Sept.  2.  Received 
$725.40  for  sundry  cash  sales. 

25c.  Sept.  17.  Hartman  Bros,  returned  50  bx.  D.  Peaches  @  $4.25  to  us  for 
credit.  Received  an  allowance  of  $287.50  from  Valley  Trading  Co.  for 
damaged  goods  on  Invoice  No.  4. 

26c.  Sept.  IS.  Sold  to  W.  L.  Mason  &  Co.  2/15,  n/60,  500  cs.  Ideal  Tomatoes 
@  $3.95,  85  cs.  Butter  Prints,  4,250  lbs.  @  43c.  Sold  to  L.  D.  Miller  & 
Son,  2/15,  n/60,  135  brls.  Sweet  Potatoes  (a)  $5.25,  175  brls.  II.  Apples  @ 
$5.75.  Sold  to  Jones  &  Clark,  2/15,  n/60,  125  brls.  G.  Flour  @  $7.35, 
185  bx.  12  lb.  Chocolate  @  $5.60. 

27c.  Sept.  19.  Received  $13.75  from  C.  &  A.  R.  R.  Co.  refund  on  freight  bill  of 
Sept.  15.  Received  a  15  day  acceptance  for  $3,726.45  from  W.  L.  Mason 
&  Co.  on  account  to  pay  bill  of  Sept.  18  in  full,  allowing  2' ,    discount. 


12J  BOOKKEEPING   AND  ACCOUNTING 

28c.  Sept.  20.  Purchased  of  Central   Milling  Co.   Invoice  No.  6,  3  30,  n  90 

$4,164.85.  Purchased    of   Horace   &    Mann   Invoice    No.    7.   ■  '•  30,  n  90, 

•  1,892.45.  Purchased  of  W.  J.  Wilson  &  Co.  Invoice  No.  8,  3  30,  n  90, 

•  I  521.65. 

29c.  Sept.  20.  Paid  our  acceptance  of  Sept.  5  for  $2,595.57,  due  today,  in  favor 
of  I  lentral  Milling  I  '<>. 

30c.  Sept.  20.     Gave  Central  Milling  Co.  a  90  day  note  at  ><■ ,    for  s:;.t; ,, 

account. 

31c.  Sept.  22.  Paid  from  petty  cash  fund  for  ruts  for  advertising  $10.25,  and 
for  form  letters  $12.50 

32c.  Sept.  22.  Received  $3,023.30  from  I  la  n  man  Bros,  in  full  for  bill  of  Sept.  6, 
allowing  '-" .  discount. 

33c.  Sept.  23.  Paid  Valley  Trading  Co.  $3,918.90  in  full  for  Invoice  NTo.  I. 
deducting  •'!',  discount.  Paid  Snyder  &  Baker  $3,214.58  in  full  for  Invoice 
No.  •").  deducting  '■'•' ,  discount. 

34c.  Sept.  i'-'!     Received  $654.25  for  sundry  cash  sales. 

35c.  Sept.  2:5.     Sold  \V.  I..  Mason  &  Co.,  2   15,  a  60,  300  cs.  M  &  .1  Coffi 
$8.75,  12ii  luls.  I'.  B.  Flour  @  $9.25. 

36c.  Sept.  24.  Received  a  60  day  note  at  i;\  for  $3,735  from  W.  I..  Mason  & 
( !o.  on  account. 

37c.  Sept.  25.  Purchased  of  Valley  Trading  Co.  merchandise  as  per  Invoice 
X.,.  9,  3  15,  □  tin.  $5,897.25. 

38c.  Sept.  26.  Collected  -I.  D.  Morton's  acceptance  of  Sept.  11.  due  todav, 
for  $2,829.75. 

39c.  Sept.  27.  Paid  office  help  for  two  weeks,  +:!7-">.  Paid  sales  force  for  two 
weeks,  $471.60.    I'aid  delivery  drivers  for  two  weeks,  $110. 

40c.  Sept.  2s.    Sold  to  J.  D.  Morton,  2  15,  o  60,  275  bx.  Silver  Prunes  (a   - 

300  cs.  Ideal  Tomatoes  (5  +4.2:..  Sold  to  W.  L.  .Mason  &  Co.,  2  L5,  n  60, 
200  cs.  Butter  Prints,  6,750  lbs.  (3  13c,  200  l>x.  12  11..  Chocolate  (g  --.tit'. 
Sold  Hartman  Pros..  2  15,  n  tin.  25  cs.  Glucose  Syrup  (§  $4  15,  15  brls.  11. 

Apples   (5    S."..7o. 

lie.  Sept.  20.     Purchased  of  Snyder  &  Baker,  rchandise  as  per  Invoice  No. 

in.  3  30,  n  90,  $4,782.65. 

42c.  Sept.  30.  The  statement  from  the  petty  cash  fund  shows  Selling  Expense 
$72.50.      (lave  a  check  for  this  amount   to  restore  the  petty  cash  fund. 

13c.  Sept.  .".t1.  Paid  officers' salary  for  the  month  $750.  Mel.it  Administrative 
Expense.  If  a  Salary  account  were  kept,  this  amount  would  l.e  charged 
to  ( >fficers'  Salaries  account.  I 

14c.  Sept  .'in.  Prepare  to  post.  Total  all  the  columns  in  the  Cash  Book  and 
Journal.  Rule  and  balance  the  Cash  Book,  and  rule  the  Journal,  bringing 
down  i  he  footings  in  each  as  shown.     Total  the  Purchases  Book  and  Sales 

Book  and  rule  and  fool   them.      Do  not   post  the  footings  of  Special  columns 

and  the  toiaK  of  the  Purchases  and  Sales  Books  until  all  other  posting  is 
completed. 

After  the  posting  is  completed,  take  a  Trial  Balance,  then  prepare  and 
post  Journal  entries  to  r ird  the  following  supplementary  facts  in  the 


BOOKKEEPING  AND  ACCOUNTING  125 

books,  and  take  a  Final  Trial  Balance  before  closing.     Refer  to  paragraphs 
27  to  30. 

Merchandise  Inventory,  September  30 $32,815.94 

Insurance  expired   40.00 

Accrued  Assets: 

[nteresl  accrued  on  Notes  Receivable $3.74 

Accrued  Liabilities : 

[nteresl  accrued  on  Notes  Payable $6.28 

Unpaid  office  help  half-week 93.75 

Unpaid  sales  force  half-week 117.90 

Unpaid  delivery  drivers  half  week 27.50 

Deferred  Charges  to  Operation: 

Postage  and  office  supplies $52.50 

Advertising  matter  on  hand 37.50 

Depreciation : 

5  ft  on  Office  Equipment $67.50 

5'  i    on  Store  Fixtures 103.7.') 

10' ,   on  Delivery  Equipment 150.00 

Reserve  for  Doubtful  Accounts: 

4%  of  Accounts  Receivable $415.79 

t5c.  Sept.  30.  From  the  Final  Trial  Balance,  prepare  a  Balance  Sheet  and  a 
Profit  and  Loss  Statement,  and  close  the  books  by  journal  entries.  Refer 
to  paragraphs  35  to  37,  and  Illustrations. 

4Gc.  Sept.  30.  Close  the  Profit  and  Loss  account  into  the  Surplus  account, 
transferring  the  net  profit  to  Surplus: 

Profit  and  Loss $xxxx.xx 

Surplus    $xxxx.xx 

Rule  and  foot  all  the  accounts  that  have  been  closed.  Any  dividend 
declared  would  be  charged  to  Surplus  and  credited  to  Dividend  No.  1 
(or  whatever  number  it  may  be)  account.     (See  paragraph  123.) 

!7c.  Oct.  1.  Prepare  and  post  journal  entries  to  close  Accrued  Assets,  Accrued 
Liabilities  and  Deferred  Charges  to  Operation  accounts,  and  transfer  the 
items  in  these  accounts  back  to  the  accounts  affected.  Refer  to  paragraph 
40  and  Illustration  No.  26.  Date  these  entries  Oct.  1,  because  they  should 
be  posted  below  the  ruling's  as  they  are  to  appear  in  the  business  of  the  next 
period.     All  entries  hereafter  are  dated  October  1. 

48c.  Oct.  1.     The  Board  of  Directors  have  held  a  meeting  and  declared  a  20' 
dividend.     Prepare  a  journal  entry  and  post  it,  to  set  up  this  dividend 
account. 

Surplus $xxxx.xx 

Dividend  No.  1 $xxxx.xx 

Open  "Dividend  No..  1"  account  and  post  the  above  journal  entry. 
Dividend  No.  1  shows  this  to  be  the  first  dividend  declared  by  the  company. 
The  next  would  be  "Dividend  No.  2"  and  so  on.  In  a  large  corporation 
where  there  are  many  stockholders  a  check  would  be  made  for  the  total 
amount  of  the  dividend  and  deposited  in  a  separate  bank  account,  and  the 
matter  of  making  the  checks  and  mailing  them  to  stockholders  put  in 
charge  of  special  clerks  to  save  the  officers  or  others  this  time,  but  in  a 
small  company  the  checks  would  be  made  by  the  bookkeeper,  signed  by 
the  proper  officer  and  mailed  as  soon  as  convenient. 

I'»e.  Oct.  1.  Have  .T.  D.  Melton  a  clie.de  for  $4,000  for  his  20';  dividend  on 
200  .shares  of  stock.      Caw   R.  ( '.   Palmer  a   check    tor  $2,000   for  his  20',' 


126 


I'.OOKKKKIMXfi   AND  ACCOUNTING 


dividend  on  100  shares  of  stock.     Gave  T.  L.  .lames  a  check  for  $2,000  for 
liis  20'  I   dividend  on  100  shares  of  stock. 

Debit  "Dividend  No.  1"  on  the  credil  side  of  the  (ash  Book,  below 
the  ruling  for  each  of  these  checks  separately.  Posl  these  entries  to 
"Dividend  No.  I"  account  in  the  Ledger,  which  will  close  the  account. 

50c.  Oct.  1.     We  have  learned  thai  Hartman  Bros,  have  failed  and  the  amount 
they  owe  us  is  a  total  loss.     Make  the  Following  entry  in  the  Journal  and 

po>t    it.  to  adjust   this  loss: 

Reserve  for  Doubl  I'ul  Accounts ?1!)0.00 

Hartman    Bros $190.00 

When  this  journal  entry  is  post,,!,  Hartman  Bros,  account  is  closed  in 
the  Sales  Ledger  and  ilic  loss  is  charged  to  the  Reserve  account.  II'  this 
Reserve  for  doubtful  accounts  had  not  been  set  up.  this  would  affect  the 
Profit  and  Loss  account,  and  he  troublesome  to  adjust,  hut  in  this  way 
the  net  profit  is  not  disturbed. 

51c.  <>ct.  ].     Rule  and  foot  nil  the  accounts  that  are  closed  and  take  a  proof 
Trial  Balance. 

Xole:  As  the  hooks  id'  original  entry  must  all  he  ruled  and  footed 
before  the  Trial  Balance  and  the  Profit  and  Loss  statement  can  he  pre- 
pared, and  as  the  Board  of  Directors  must  have  the  Profil  and  Loss  State- 
ment before  their  meeting  in  which  they  may  declare  a  dividend,  the  last 
transactions  are  dated  October  1.  and  these  entries  are  made  below  the 
rulings  in  the  Journal  and  Cash  Book  and  posted.  It  would  be  well  to 
make  this  proof  Trial  Balance  in  the  form  of  a  Balai Sheet,  to  be  sub- 
mitted to  the  management  to  show  thi adition  of  the  business  after  the 

dividend  has  been  paid,  and  before  any  other  business  has  been  recorded. 


ILLUSTRATION    NO     62.       PURCHASES    HOOK 


BOOKKEEPING  AND  ACCOI  NT1NG 

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Note:  Sales  Discount,  $161.70,  is  posted  to  the  debil  of  Sales  Discounl  ac- 
count, and  the  same  amounl  is  also  posted  to  the  debil  of  Accounts  Receivable 
account 


BOOKKEEPING  AND  ACCOUNTING 


129 


ILLUSTRATION    NO.    65.      CREDIT    SIDE    OF    CASH    BOOK 

Note:  Purchases  Discount,  $429.33,  is  posted  to  the  credit  of  Purchases  Dis- 
count account,  and  the  same  amount  is  also  posted  to  the  debil  of  Arc-mints 
Payable  account. 


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ILLUSTRATION  NO.  07.   LEDGER  ACCOUNTS 


PROBLEM  14.  DETAILED  STATEMENT  AND  SCHEDULES 

Prepare  schedules  to  support  the  items.  Accounts  Receivable,  $10,3111.75  and 
Accounts  Payable,  $19,508.85  of  the  Balance  Sheet,  Exhibit  A,  Empire  Grocer 
Co.  Refer  to  paragraph  34,  and  Illustration  No.  26.  Observe  that  there  is  a 
change  in  Accounts  Receivable  on  account  of  the  failure,  of  Hartman  Bros. 

Prepare  a  detailed  statement  supporting  Administrative  Expense,  Selling 
Expense  and  Delivery  Expense,  analyzing  the  amount  of  these  expenses  as. 
shown  in  the  Profit  and  Loss  Statement.  Exhibit  B.  Refer  to  paragraph  33 
and  Illustration  No.  25. 

Submit  the  work  for  approval. 

Bookkeeping  and  Accounting:  Bookkeeping  is  the  systematic  recording  of 
business  transactions,  for  the  purpose  of  showing  the  progress  of  the  business, 
and  the  condition  of  the  business.  Two  kinds  of  books  are  used:  books  of 
original  entry  and  books  of  final  entry.  The  books  of  original  entry  are  the 
Journal,  ('ash  Book,  Purchases  Book,  Sales  Book  or  any  book  in  which  transac- 
tions are  first  recorded,  as  the  intermediate  step  preparatory  to  posting  the 
items  to  Ledger  Accounts.  The  journal  entry  is  the  basis  of  every  entry  in 
any  book  of  original  entry.  The  book  of  final  entry  is  the  Ledger.  If  several 
Ledgers  are  kept,  the  books  of  final  entry  may  be  the  General  Ledger,  Sales 
Ledger  and  Purchases  Ledger,  or  General  Ledger,  City  Ledger,  Country  Ledger 
and  Purchases  Ledger,  or  there  may  be  any  number  of  Ledgers  divided  accord- 
ing to  the  alphabet,  or  divided  according  to  territory,  or  by  states.  Whatever 
number  of  Ledgers  are  used,  there  should  be  a  controlling  account  for  each 
Ledger,  and  the  bookkeeper  in  charge  of  each  ledger  will  prove  his  ledger  with 
the  controlling  account  in  the  General  Ledger.  Thus  it  will  be  seen  how  any 
number  of  bookkeepers  may  be  employed  and  all  their  work  harmonized.  The 
Trial  Balance  at  the  end  of  each  month,  is  taken  from  the  General  Ledger. 

The  progress  of  the  business  is  shown  by  the  Profit  and  Loss  Statement. 
The  condition  of  the  business  is  shown  by  the  Balance  Sheet,  or  statement  of 
Assets  and  Liabilities.  The  correctness  of  these  statements  is  tested  by  proving 
either  statement  with  the  other.  These  statements  are  "Exhibits"  made  to 
show  the  results  of  the  bookkeeping.  These  results  are  then  incorporated  into 
the  books  by  a  process  called 


138  BOOKKEEPING  AND  ACCOUNTING 

The  routine  of  bookkeeping  is  the  recording  of  the  transactions  and  posting 
the  items  to  the  Ledger  accounts  and  taking  a  Trial  Balance.  Accounting  is 
auditing  of  the  bookkeeping  to  verify  the  correctness  of  it.  the  preparation  of 
the  Balance  Sheet  and  Profit  and  Loss  Statement,  the  closing  of  the  books  to 
correspond  with  these  statements,  preparing  analysis  sheets  or  detailed  state- 
ments, schedules  and  comparative  statements  for  the  information  of  the  man- 
agement. It  is  also  the  pari  of  accounting  to  devise  forms  and  install  systems 
to  obtain  better  results  and  greater  efficiency,  securing  the  maximum  of  infor- 
mation for  the  minimum  of  effort ;  and  to  devise  forms  and  means  to  ascertain 
the  cosl  per  unit,  per  job,  or  per  any  given  quantity  in  manufacturing.  From 
this  view  point,  the  studenl  will  see  that  the  bighest  goal  to  be  reached  is  by 
progressive  steps. 

This  course  is  developed  to  a  point  thai  should  qualify  the  1 kkeeper  to 

keep  any  form  of  books  and  do  the  accounting  necessary  to  give  the  manage- 
ment all  necessary  and  useful  information.  It  develops  the  elements  of 
accounting  and  does  more  than  lay  the  foundation  for  higher  accounting.  It 
puts  the  student  well  on  the  waj  . 

Errors  in  Trial  Balance:    [f  the  Trial  Balance  does  no1  balance,  there  has 
been  a  mistake  in  posting  or  in  addition  or  subtraction.    Figures  maj  have  been 
transposed  in  putting  down  a  number  as  in  writing  $24.60,  when  it  should 
$26.40.     Sum.'  item  may  have  been  posted  to  the  wrong  side  of  some  account. 

It    may   be   that    a   mistake   has   1 n   made   in   totaling  the   ledger  accounts,   or 

in  totaling  some  hook  of  original  entry  or  some  special  column,  or  in  adding 
the  Trial  Balance.  Whatever  the  error,  we  know  that  if  the  Trial  Balance 
does  not  balance  there  has  been  a  mistake  in  some  i>(  these  ways.  There  is  no 
quesl ion  about  that. 

If  an  error  is  made  by  writing 54  for  15,  or  36  for  63,  or  any  other  transposi- 
tion, the  difference  is  always  divisible  by  nine.  For  instance,  63  less  36  is  27; 
L'7  divided  by  9  is  3,  the  difference  between  the  two  digits  id'  the  number  trans- 
posed; 6  less  :;  U  :!.  So  if  the  Trial  Balance  is  out  LIT.  it  is  probably  a  trans 
position  of  36  or  63.  The  same  is  true  of  any  other  transposition.  Write  Is 
for  81,  ami  the  balance  is  out  63,  which  divided  by  !'  is  7.  the  difference  between 
1  ami  s.  so  if  the  quotient  after  dividing  by  9  is  7.  it  may  he  a  transposition  of 
18,  29  or  81. 

Suppose  the  Trial  Balance  were  out  270;  27(1  divided  by  9  is  30.  The  cipher 
shows  that  the  transposition  i>  in  the  tens  and  hundreds  column,  and  the  3  is 
the  difference  between  the  two  figures  transposed,  so  the  number  may  he  470 
for  740,  360  lor  o  0,  or  580  for  850,  or  any  number  the  difference  in  the  digits 
oi  which  is  li.  and  in  the  lens  and  hundreds  column. 

Ascertain  the  amount  the  Trial  Balance  is  out.  then  look  for  this  amount. 

also  for  One-half  this  a nut.  for  if  an  item  were  posted  to  the  wrong  side,  the 

balance  would  be  out  double  the  amount  of  the  it<  m.  Then  verify  the  cash  bal- 
ance and  all  the  additions  and  subtractions.  If  this  does  qoI  discover  the  error, 
check  all  the  postings  carefully,  placing  a  cheek  mark  opposite  each  item  in  the 
ledger  and  in  the  book  from  which  posted.  After  checking,  look  over  the 
Ledger  accounts,  and  the  item  not  checked  will  he  the  error,  if  the  error  was 
made  in  posting.     If  it  is  not  in  posting,  it  is  in  adding  or  subtracting. 

A  Trade  Acceptance:    A  Trade  Acceptance  is  a  time  draft,  accepted,  and  is 

treated  in  the  hooks  ;is  Notes  Receivable,  the  same  as  any  other  note  or  ac- 
ceptance. It  is  defined  by  the  Federal  Reserve  Hoard  as  a  •'Hill  of  Exchange" 
(time  draft)  drawn  by  the  seller  of  goods  on  the  purchaser,  and  accepted  by 
the  purchaser.  It  is  virtually  tin-  same  in  form  as  the  ordinary  acceptance, 
but  its  purpose  iv  different. 


BOOKKEEPING  AND  ACCOUNTING  130 

The  usual  time  draft  accepted  (acceptance)  is  used  to  make  collection  of 
accounts  thai  arc  due  or  past  due,  and  the  fact  that  the  ordinary  time  draft  is 
drawn  and  accepted,  is  evidence  of  an  extension  of  time  on  the  bonk  account, 
with  whatever  that  may  mean,  while  the  purpose  of  the  Trade  Acceptance  is 
to  provide  an  evidence  of  debt  that  can  be  used  by  the  holder  (the  seller)  in  a 
better  way  than  he  can  the  open  book  account.  In  other  words,  it  is  a  plan 
for  putting  the  book  accounts  in  the  form  of  commercial  paper,  so  they  can 
be  used  through  the  bank,  thus  keeping  the  money  in  action  instead  of  lying 
idle  in  open  book  accounts. 

The  Trade  Acceptance  is  drawn  and  accepted  at  the  time  the  sale  is  made 
or  within  a  very  few  days  thereafter,  and  carries  with  it  no  evidence  of  un- 
certainty. So  this  kind  of  paper  is  in  the  class  of  "preferred  commercial 
paper"  and  can  be  discounted  at  banks  to  an  almost  unlimited  extent  by  a 
business,  at  a  low  rate  and  without  affecting  the  real  borrowing  capacity  of  the 
business. 

It  does  not  cost  the  purchaser  anything,  and  gives  him  all  the  time  he  ex- 
pects even  on  the  open  book  account.  It  increases  the  seller's  working  capital 
and  buying  power,  so  that  he  can  buy  to  better  advantage  and  thus  be  in  a 
position  to  do  better  by  the  purchaser  (his  customer).  It  is  better  for  both 
the  seller  and  the  buyer. 

Reserve  Banks  are  permitted  to  take  Trade  Acceptances  as  preferred  com- 
mercial paper  in  almost  unlimited  amount  as  rediscounts  from  member  banks, 
and  even  to  buy  or  discount  this  kind  of  paper  direct  from  the  holder  if  other 
banks  do  not  take  it.  This  is  important  to  show  the  class  in  which  Trade  Ac- 
ceptances are  considered,  but  the  value  to  the  business  interests  of  the  United 
States,  if  this  method  were  universal  here,  is  almost  beyond  the  stretch  of  the 
imagination. 

On  open  book  accounts,  a  business  cannot  expect  to  borrow  at  the  bank 
more  than  50',  of  their  value,  and  in  most  cases  much  less,  while  if  these  ac- 
counts had  been  put  into  Trade  Acceptances  at  the  time  the  sales  were  made, 
the  business  could  discount  all  of  them  at  once,  and  have  the  money  right  back 
in  the  business,  and  in  action.  In  most  cases  it  would  be  unnecessary  for  the 
business  to  make  large  and  long  loans  at  the  bank,  if  this  were  done. 

If  Trade  Acceptances  were  universally  used  in  the  United  States,  it  would 
increase  the  working  capital  and  business  capacity  of  the  concerns  of  this 
country  probably  7or,',  and  perhaps  much  more.  It  is  hard  to  realize  what 
this  would  mean.  It  would  be  a  great  saving  to  buyer  and  seller.  It  would  be 
a  great  convenience  to  both.  It  would  make  the  conducting  of  every  business 
simpler  and  much  more  satisfactory.  Every  bookkeeper,  every  credit  man, 
and  every  one  in  a  position  to  do  so  should  advocate  the  Trade  Acceptance 
instead  of  the  open  book  account.  It  is  applicable  to  any  wholesale  or  man- 
ufacturing business,  and  to  a  very  large  extent  the  retail  business  as  well. 
It  is  the  next  thi  lg  to  a  cash  business  and  very  much  more  practical.  With 
us.  it  is  a  matter  of  education.    In  Europe,  it  is  in  general  use. 


140  BOOKKEEPING  AND  ACCOUNTING 

CORPORATION  ACCOUNTING 

103.  A  Corporation  is  an  association  of  individuals  united  for  some  com- 
mon purpose,  permitted  by  the  law  to  use  a  common  uame,  and  to  change  its 

withoul  dissolution  of  the  association.  Under  this  uame  it  may  sue  or 
I"-  sued,  and  transact  business  the  same  as  a  person,  in  which  sense  it  is  an 
artificial  person,  created  by  law. 

104.  Any  change  of  partners  in  a  partnership  by  retirement,  death  or  other- 
wise, of  one  of  the  partners,  dissolves  the  partnership,  and  makes  reorganiza- 
tion, the  forming  of  a  oew  partnership,  necessary  if  the  partnership  business 
is  to  be  continued.  So  the  life  of  a  partnership  depends  upon  the  life  of  the  in- 
dividual and  on  bis  ability  to  continue. 

105.  Tl bjects  of  forming  a  corporation,  or  incorporating  a  business, 

to  secure  more  time,  greater  duration,  than  the  probable  life  of  an  individual 
affords;  to  make  it  convenient  to  transfer  the  rights  of  ownership,  or  interest 
in  the  business,  withoul  affecting  the  organization;  to  provide  greater  capital 
by  making  it  convenient  for  investors  of  even  limited  means  to  1" me  in- 
terested in  the  business  on  the  same  basis  as  tln.se  of  larger  means;  to  limit 
the  liability  of.  the  owners  who  are  the  stockholders. 

106  The  i  apital  in  a  partnership  is  not  limited  to  any  particular  amount  by 
law  and  may  be  increased  to  the  limit  of  the  ability  of  the  owners,  or  decreased 
at  the  option  of  the  owners;  while  the  capital  of  a  corporation  is  established 
by  law,  and  is  specified  in  its  "Certificate  of  Incorporation,"  and  this  specified 
capital,  so  stated,  cannol  be  increased  uor  reduced  withoul  taking  the  neces- 
sary steps  required  by  law. 

IdT.  Any  business  may  change  to  a  corporation,  or  any  body  of  men  may  form 
a  corporation,  by  making  application  for  a  "certificate  of  incorporation"  to  the 
proper  authorities  of  the  state  under  whose  laws  it  is  desired  to  incorporate, 
and  complying  with  the  corporation  laws  of  that  state.  This  application  or 
certificate  must  be  signed  and  executed  before  a  notary  public,  or  some  official 
authorized  to  take  the  acknowledgment,  by  three  or  more  persons,  all  of 
whom  are  subscribers  to  the  stock  of  the  proposed  corporation  and  must  state: 

1.  The  name  of  the  proposed  corporation,  which  na must  not  con 

with  the  name  of  any  other  corporation  of  thai  state. 

2.  The  purpose  lor  which  formed,  the  amount  of  capital  stock-,  both  com- 
mon and  preferred,  and  the  number  of  shares  and  par  value  of  each. 

3.      The  location  of  the  principal   husiness  office,  and  the  number,  name  and 

addresses  id'  the  lirst  directors,  not   less  than  three,  who  must  he  subscribers 

to  the  stock  of  the  corporation. 

108.  The  specific  requirements  are  different  in  different  states.  The  stoch 
holders  are  the  owners,  lmt  the  board  of  directors,  elected  by  the  stockholders, 
are  the  managers.  The  husiness  is  conducted  bj  officers  elected  l>\  the  hoard 
of  directors,  usually  President,  Vice-President,  Secretary  and  Treasurer,  whose 
unties  and  powers  are  prescribed  by  the  by-laws  of  the  corporation  and  author- 
izations h\   the  hoard  of  directors. 

Instead  of  submitting   a  sample  ■'Certificate  of  Incorporation,"  the 

student  is  referred  to  the  law  text  in  which  the  proper  steps,  legal  features 
ami  requirements  are  set  forth.  It  is  usually  the  part  of  wisdom  to  place  the 
matter  of  incorporation  in  the  hands  of  a  skilled  lawyer.  However,  a  care- 
ful study  of  corporate  organization  and  management  will  enable  the  student 
to  better  understand  the  affairs  of  the  corporation. 


BOOKKEEPING  AND  ACCOUNTING 


141 


The  books  usually  kept  to  record  the  acts  of  the  stockholders  and  Board 
of  Directors,  and  records  of  subscriptions,  stock  issued,  transfer  of  stock,  and 
dividends  in  a  large  corporation  are: 


Subscription   Book 
Siock  ( lertificate  Book 
Si  nek  Ledger 


Minute  Book 
Dividend  Book 


If  stock  is  to  be  paid  for  in  installments,  an  Installment  Book  is  kept,  which 
is  like  a  receipt  book.  In  a  small  corporation,  a  subscription  list  may  be  made, 
but  the  books  usually  kept  are  the  Minute  Hook  and  the  Stock  Certificate 
Book.  The  Minute  Book  is  a  record  of  the  acts  of  the  Stockholders  at  stock- 
holder's meetings,  and  of  the  Board  of  Directors  at  their  stated  and  special 
meetings.  The  Stock  Certificate  Book  is  a  record  of  the  stock  issued  and  of 
cancellations. 

110.  If  the  stock  is  to  be  paid  for  in  installments,  each  subscriber  is  given 
a  receipt  from  the  Installment  Book,  upon  the  payment  of  each  installment, 
and  when  the  last  installment  is  paid,  a  Stock  Certificate  is  issued  for  the 
number  of  shares  paid  for  and  these  receipts  arc  taken  up.  These  books  are 
kept  outside  of,  or  aside  from  the  regular  business  bookkeeping.  They  are 
usually  kept  by  the  Secretary  or  Secretary-Treasurer  if  one  person  tills  both 
offices.  These  books  are  all  printed  blank  forms  ready  to  be  tilled  out,  and 
the  posting  from  the  stubs  of  the  Stock  Certificate  Book  to  the  Stock  Ledger 
is  a  simple  matter,  and  as  the  student  may  see  and  examine  these  blank  forms 
at  any  place  where  these  supplies  are  kept  for  sale,  it  is  not  necessary  to  il- 
lustrate them  here. 

111.  Opening  Entries:  R.  C.  Duffin.  C.  M.  Miller.  A.  C.  Allyn  and  E.  W. 
Thomas  have  decided  to  incorporate  the  Atlas  Trading  Co.  under  the  laws 
of  the  State  of  New  Jersey.  They  have  made  application  and  received  their 
Certificate  of  Incorporation  authorizing  a  Capital  Stock  of  $50,000,  divided 
into  500  shares  of  the  par  value  of  $100.  R.  C.  Duffin  has  subscribed  for  150 
shares  at  par,  C.  M.  Miller  for  125  shares  at  par,  A.  C.  Allyn  for  125  shares  at 
par,  and  E.  W.  Thomas  for  100  shares  at  par.  All  have  paid  for  their  stock  in 
cash,  and  you  are  requested  to  open  the  books. 

January   1,    192    . 


is 


The  Atlas   Trading  Company,  incorporated 
under   the   laws   of  the   State  of  New  Jersey  , 
on  January    1,    192    ,   with  an   authorized  cap- 
ital of  #50,000,    divided  into  500  shares   of 
the  par  value  of  $100. 


Subscriptions 
Capital   Stock 

For  various   subscriptions    to    the  Capi- 
tal  Stock   of  this   company,    as  per   Subscrip- 
tion Book. 

-1- 
Cash 

Subscriptions 

For  payments  received  in  full  from 
all  subscribers  to  Capital  Stock,  as  per 
Stock  Certificate  Book. 


50000 


50000 


00 


00 


50000 


50000 


CO 


oc 


142 


BOOKKHHl'INC   AMi  ACCOUNTING 


If  this  were  a  partnership,  cash  would  he  debited  ami  each  person  credited 

for  tin-  amount  invested,  bul  accounts  arc  not  kept  for  stockholders  of  a  Cor- 
poration. Instead  of  th,-  names  of  the  investors,  "Capital  Stock"  accounl  is 
used.  Tin'  names  of  the  stockholders  appear  only  in  the  Subscription  Book, 
Stork  Certificate  Book,  and,  in  large  corporations,  in  other  books  already 
mention  separate  from  ami  independent  of  the  business  bookkeep- 

ing.   The  op  atry  would  be  as  in  the  preceding  illustration. 

The  firsl  entry  represents  tin-  subscriptions  in  tin-  hooks  and  opens  the 
Capital  Stork  account  for  the  authorized  amount.  The  second  entry  debits 
the  cash  received  ami  closes  the  Subscriptions  account.  It  is  m>t  necessary 
1"  list  the  names  of  the  stockholders  as  tin'  stock  record  l ks  have  that  in- 
formation. Tin'  cash  item  is  checked  in  the  Journal  to  show  it  is  not  in  bp 
1  Misted,  ami  the  cash  is  entered  on  the  debil  side  of  tie-  ('ash  Book  and  checked 
there. 

111'.  Suppose,  instead  of  paying  the  whole  amount  of  their  subscriptions  at 
once  in  cash,  the  subscribers  had  agreed   to  pay  their  subscriptions  in  four  in- 
stallments, monthly,  beginning  January  1.    Then  the  subscriptions  in  the  Sub- 
scription Hook  would  he  entered  in  the  Installment  Book,  and  the  opening  en 
try  would  be: 

January   1,    192    . 


The  Atlas  Trading  Company,  incorporated 
January  1,  192  ,  under  the  laws  of  the  State 
of  New  Jersey,  with  an  authorized  capital 
of  $50,000,  divided  into  500  shares  of  the 
par  value  of  §100,  the  subscriptions  to  the 
Capital  Stook  to  be  paid  in  four  equal  in- 
stallments. 

Installment  No.  1.  Jan.  1,  192 

Installment  No.  2.  Feb.  1,  192 

Installment  No.  3,  Mar.  1,  192 

Installment  No.  4,  Apr.  1,  192 
Subscriptions 

For  various  subscribers  to  the  stook 
of  this  company  as  per  Subscription  Book 
and  Installment  Book. 


-1- 


Cash 


Installment   No.    1.    Jan.    1,    192 

For  payment    received   in  full   for  In- 
stallment No.    1,    by  all  subscribers. 


12500 
12500 
12500 
12500 


12500 


00 


50000 


12500 


00 


00 


On  January  1.  at  the  time  the  hooks  are  opened,  the  first  installment  is 
paid,  hence  the  entry  for  the  cash  received.  Of  course,  this  cash  would  I" 
entered  in  the  Cash  Book,  "credit  Installment  No.  1.  .Ian.  1.  sIl'.oIiH"  on  the 
debit  side  of  the  Cash  Book,  and  checked,  and  only  the  item  "Installment  No. 
1."  posted  to  the  credit  of  this  accounl  from  the  Journal  which  would  close  this 
account.  The  Journal  entry  for  each  installment  could  be  omitted  ami  the 
entry  for  each  installment,  when  paid,  entered  in  iin-  Cash  Book  and  posted  to 
the  proper  Installment  account   from  there.     The  result   would  he  the  same,  but 

we  prefer  to  r rd  these  payments  in  the  Journal  and  show  them  by  journal 

entry,  and  check  the  cash  as  explained. 


BOOKKEEPING  AND  ACCOUNTING  14:! 

As  each  installment  is  paid,  an  entry  similar  to  the  one  above  is  made. 
When  the  final  installment  has  been  paid,  the  receipts  issued  from  the  Install- 
ment Book  are  taken  up  and  the  Stock  Certificates  issued  from  the  Stock  Cer 
tificate  Book  to  the  various  subscribers  for  the  number  of  shares  for  which 
they  have  paid,  and  posted  from  the  Stock  Certificate  Book  to  the  subscribers' 
names  in  the  "Stock  Ledger."  Then  the  Subscription  account  must  be  closed 
and  the  Capital  Stock  account  set  up.  Cash  is  already  debited  for  the  full 
amount  of  Subscription  and  the  Installment  accounts  are  all  closed,  so  tke 
•Journal  entry  required  now  is: 

Subscriptions    $50,000 

Capital  Stock   $50,000 

For  the  subscriptions  to  the  Capital  Stock  paid  in  full  by  all  subscribers. 

Note:  The  posting  of  this  entry  would  close  Subscriptions  account,  and  set  up  the 
Capital  Stock  account. 

Three  months  have  elapsed  since  the  corporation  opened  its  books  for  busi- 
ness, and  in  the  meantime  there  may  have  been  many  business  transactions 
necessary  to  be  recorded  in  the  books  of  original  entry  and  posted  to  Ledger 
accounts,  but  these  entries  for  the  subscriptions  and  Capital  Stock  need  not 
interfere  with  that  work.  Trial  Balances  for  the  end  of  January,  February  and 
March  would  be  taken  before  the  final  entry  setting  up  the  Capital  Stock  ac- 
count could  be  made,  but  Trial  Balances  may  be  taken  in  the  usual  manner,  the 
Installment  accounts  and  the  Subscription  account  representing  the  paid  up 
capital  until  these  accounts  are  closed  and  the  Capital  Stock  account  opened, 
then  the  Installment  accounts  and  the  Subscription  account  will  disappear  from 
the  next  Trial  Balance  and  the  Capital  Stock  account  will  appear. 

113.  Controlling  Account:  It  should  be  observed  that  the  Capital  Stock 
account  in  the  General  Ledger  may  be  considered  a  controlling  account  for 
the  "Stock  Ledger"  previously  mentioned.  Of  course,  each  stockholder  is 
credited  with  the  amount  of  stock  he  holds  and  all  transfers  of  stock  are 
posted  from  the  Stock  Certificate  Book  to  the  debit  and  credit  of  the  stock- 
holders in  the  Stock  Ledger.  The  total  of  all  the  credit  balances  in  the  Stock 
Ledger  must  equal  the  amount  shown  by  the  Capital  Stock  account  in  the 
General  Ledger. 

114.  Other  Entries:  It  may  happen  that  when  a  corporation  is  organized 
and  all  the  stock  is  issued,  there  is  not  sufficient  cash  to  carry  on  the  business, 
because  all  or  nearly  all  the  capital  stock  was  issued  in  lieu  of  or  in  payment 
for  property  turned  over  to  the  corporation  by  the  subscribers.  Money  might 
be  borrowed  on  notes  or  bonds,  but  suppose  the  stockholders  should  vote  to 
donate  10%  of  their  stock  to  be  sold  to  raise  money  for  the  working  capital 
Should  the  stockholders  of  the  Atlas  Trading  Co.,  shown  in  the  first  opening 
entry,  decide  to  donate  10%  or  50  shares  of  their  stock  for  this  purpose,  what 
entry? 

This  stock  handed  back  to  the  corporation  cannot  be  charged  to  Capital 
Snick  account  because  this  would  reduce  the  Capital  Stock  and  this  is  not  law- 
ful. The  capital  stock  cannot  be  reduced  nor  increased  without  formal  appli- 
cation and  legal  permission  by  the  state.  This  50  shares  of  stock  donated  is 
placed  in  the  hands  of  the  Treasurer  to  be  disposed  of  for  the  purpose  in- 
tended, and  until  disposed  of  is  Treasury  Stock.    The  entry  would  be: 

Treasury  Stock    $5,000 

Working  Capital    $5,000 

The  term  "working  capital"  in  this  entry  may  be  objected  to  on  the 
ground  that  there  is  no  working  capital  until  this  treasury  stock  is  sold,  or 
that  the  amount  of  it  is  in  doubt,  because  the  stock  may  be  sold  below  par  or 


144 


BOOKKEEPING  AND  ACCOUNTING 


000 
If  the  Treasury 


1,250 


above  par.  and  that  this  fad  is  better  represented  by  using  the  term  "Contin- 
gent Working  Capital,"  or  "Working  Capital  Reserve,"  or  "Working  Capital 

Suspense,"  until  the  exact  amount  is  known,  anil  then  close  this  a >un1  and 

sel   up  the  account,  "Working  Capital"  by  the  entry,  "Contingent   Working 
Capital"  to  "Working  Capital"  for  the  proper  amount. 

Winn  this  Treasury  stuck  is  sold  or  any  part  of  it,  the  Cash  Beok  entrj 
would  I"',  credil  "Treasury  Stock"  on  the  debil  side  of  the  Cash  Book,  and 

when  it  is  all  sold  the  Treasury  Stock  account  would  I lose. I.     But  suppose 

this  50  shares  of  Treasury  Stuck  were  sold  al  -V,   discount,  what  entry 

Cash    $3,750 

Working  Capital   1,250 

Treasury  Stock 

In  this  case  the  working  capital  would  be  reduced  $1,250. 
Stock  were  sold  at  25'  ,   premium,  -•">',  above  par.  what  entry? 

Cash    $6,250 

Treasury  stock  

Working    I  Capital    

Then  the  working  capita]  would  be  increased  $1,250.  These  are  usually 
Cash  Book  entries,  hut  may  be  entered  in  the  Journal  and  Cash  Booh  both  as 
previously  shown. 

115.  Unsubscribed  Stock:  In  a  "close  corporation."  thai  is.  where  then 
are  a  few  stockholders  who  take  all  the  stock,  the  stock  is  usually  all  taken  and 
paid  for  at  the  time  or  within  some  limited  time,  hut  in  many  cases,  and  espe 
cially  in  larger  capitalization,  usually  only  a  part  of  the  stock  is  subscribed  al 
the  time  of  organization.  Only  the  stock  thai  is  paid  for  can  be  issued,  and 
the  remainder  is  unissued  or  unsubscribed  stock. 

Suppose  the  Atlas  Trading  Co.  is  incorporated  under  the  laws  of  the  S 
of  New  Jersey  on  January  1,  1!>2 — .  with  an  authorized  capital  of  $75,000,  di- 
vided into  750  shares  of  the  par  value  of  -id11'1,  and  the  subscriptions  as  per 
Subscription  Book  are:  ]{.  C.  Duffin,  150  shares:  c.  M.  Miller,  125  shares;  C 
II.  Ready,  100  shares:  A.  c.  Allyn,  75  shares;  B.  W.  Thomas,  50  shares,  all  at 
par.  which  subscriptions  they  pay  in  full  in  cash.  There  is  left  250  shares  un- 
subscribed.     Prepare   the   opening  entry. 

January    1,    19C 


The  Atlas  Trading  Company,  incorporated 
Junuary  1,  192,  under  the  laws  of  the  State 
of  l!ew  Jersey,  with  an  authorized  capital  of 
$75,000,  divided  into  750  shares  of  the  par 
value  of  $100. 

Subscriptions 

rrnsubsoribed  Capital  Stock 
Capital  Stock 

For  various  subscribers  to  the  stock  of 
this  company,  as  per  Subscription  Book. 


-1- 


Cash 

Subscriptions 


Received  payment  in  full  lor  all  sub- 
scriptions to  capital  stock,  as  per  the 
Subscription  Book  and  Stock  Certificate 
Book. 


50000 
£5000 


50000 


00 


75000 


50000 


00 


00 


BOOKKEEPING  AND  ACCOUNTING 


145 


Then,  suppose  at  a  later  date,  January  5,  E.  D.  Morgan,  A.  L.  Hawkins  and 
B.  S.  Peters  subscribe  for  20  shares  each  at  par,  which  they  pay  in  cash.  These 
subscriptions  would  appear  in  the  Subscription  Book,  and  the  Journal  entries 
would  be : 

Subscriptions     $6,000 

Unsubscribed  Capital  Stock $6,000 

For  subscript  inns  of  E.  D.  Morgan,  A.  L.  Hawkins  and  1'..  S.  Peters,  2(1  shares 
each  at  par,  as  per  subscription  book. 


Cash 


.  $6,000 


Subscriptions 


$6,000 


Received  payment  in  full  for  60  shares  of  the  capital  stock  of  this  company 
as  per  Subscription  Book. 

116.  Proposition  1.  Preferred  Stock.  The  Acme  Tool  Co.  incorporated 
under  the  laws  of  the  State  of  Illinois  on  January  1.  192 — ,  with  an  authorized 
capital  of  $100,000  of  which  $50,000  is  Preferred  Stock,  divided  into  500  share, 
of  the  par  value  of  $100.  and  $50,000  is  Common  Stock,  divided  into  500 
shares  of  the  par  value  of  $100.  H.  M.  Huff,  C.  M.  Barnes,  L.  D.  Miller,  O. 
H.  AVhite  and  T.  L.  Jones  have  each  subscribed  for  75  shares  of  the  Preferred 
Stock  at  par,  and  75  shares  of  the  Common  Stock  at  par.  All  have  paid 
their  subscriptions  in  cash,  except  II.  M.  Huff,  who  assigns  a  patent  valued 
at  $2,250,  to  the  company  to  apply  on  his  subscription  to  the  Common  Stock, 
and  is  allowed  30  days  in  which  to  pay  the  remainder  of  his  subscription. 
This  leaves  125  shares  of  the  Preferred  Stock  unsubscribed  and  125  shares  of 
the  Common  Stock  unsubscribed.    Prepare  the  opening  entry. 


January  1,  192 

The  Aome  Tool  Company,  Incorporated  under 
the  laws  of  the  State  of  Illinois  on  January 
1,  192  .  with  an  authorized  capital  of  $100,000 
of  whtoh  $50,000  is  Preferred  Stock,  divided  in- 
to 500  shares  of  the  par  value  of  $100,  and 
$50,000  is  Common  Stock,  divided  into  500  shares 
of  the  par  value  of  $100. 

Subscriptions  to  Preferred  Stock 
Subscriptions  to  Common  Stock 
rnsubaoribed  Preferred  Stock 
Unsubscribed  Common  Stook 
Common  Capital  Stook 
Preferred  capital  Stock 

37500 
37500 
12500 
12500 

00 
00 

00 
00 

50000 
50000 

00 
00 

For  various  subscriptions  to  the  stock  of 
thi3  oompany,  as  per  Subscription  Book. 

</ 

-1- 
Cash 
Patent 

Subscriptions  to  Preferred  Stock 

Subscriptions  to  Common  Stook 

Received  for  subscriptions  to  the  Capital 
Stock  of  this  company,  as  per  Stock  Certificate 
Book. 

60000 
2250 

00 
00 

30000 
32250 

00 

00 

Ill, 


BOOKKEEPING  AND  ACCOUNTING 


Use  journal  and  ledger  paper  and  write  this  opening  entry  on  the  journal 
paper.  Open  accounts  on  the  ledger  paper  and  posl  this  opening  entry  and 
then  prepare  a  Balance  Sheel  from  the  Ledger  accounts.  A  balance  Sheet 
should  be  prepared  immediately  upon  opening  a  set  of  books. 

The  unsubscribed  stock  should  a]  the  credit  side  or  liability  side  of 

the  Balance  Sheet  as  a  deduction  instead  of  an  Asset  on  the  Asset  side.  The 
subscriptions  to  Capital  Stuck,  unpaid,  should  appear  as  an  asset  on  the  Bal- 
ance Sheet  until  they  are  paid.  The  Balance  Sheet  prepared  from  your 
Ledger  accounts  should  appeal-  as  follows: 


Balanoe  Sheet.  Aome  Tool  Co.  January  1.  192 


Cash 

Patent 

Subscriptions  to 

Preferred  stook 
Subscriptions  to 

Cocoon  Stock 


60000 
2250 

7500 

5250 


75000 


7  5000 


00 


CP 


Preferred  Capital 
Stook 

Less  unsubscribed 
Preferred  Stock 

Preferred  Capital 
Stock  Issued 

Common  Capital 
Stock 

Less  Unsubscribed 
Common  Stock 

Common  Capital 
Stock  Issued 


50000 
12500 


50000 
12500 


37500 


37500 


75000 


00 


30 


00 


117.  Preferred  Stock:  The  student  has  already  observed  that  there  arc  or 
may  he,  two  classes  of  stock,  common  stock  and  preferred  stock.  There  may 
aUo  be  First  Preferred  and  Second  Preferred.  The  holders  of  the  common 
stock  bave  one  vote  for  each  share  of  stock  held,  in  the  election  of  the  board 
of  directors  or  upon  any  question  stockholders  maj  be  called  upon  to  vote. 
The  preferred  stock  has  no  voting  power  i  unless  so  specified  when  issued  and 
offered  for  sale,  which  is  unusual  .  hut  in  the  matter  of  dividends  the  pre- 
ferred stock   takes   preferei ver  the  ordinary  or  common  stock,  that    is. 

when  a  dividend  is  declared  to  be  paid  out  of  the  net  earnings,  the  dividend 
must  he  declared  on  the  preferred  stock  before  any  dividend  can  he  declared 
or  paid  on  the  common  stock. 

The  only  difference  between  the  stock  certificates  of  each  kind  of  stock  is 
that  one  is  marked  "Preferred"  and  the  other  is  marked  •'Common."  The 
preferred  stock  receives  dividends  first,  then  if  a  sufficient  amount  remains  of 
the  net  earnings,  a  dividend  may  lie  declared  on  both  common  and  the  pre- 
ferred. 

If  the  preferred  stock  is  "Cumulative,"  then  all  the  dividends  that  have 
been  passed,  that  is,  not  paid,  must  he  paid  before  any  dividend  can  he  declared 
and  paid  on  the  common  stock.  If  the  preferred  stock  is  not  cumulative,  then 
if  dividends  have  been  passed,  not  declared,  lor  anj  period,  neither  the  pre- 
ferred nor  the  common  will  receive  any  dividends  for  that   period. 

The  Unsubscribed  Capital  Stock  might  he  called  "Unissued  Stock"  hut 
'I  reasury  Stock  is  also  unissued  stock.  It  seems  better  to  name  all  stock  of  the 
Corporation  that  is  returned  to  it.  by  donation  or  otherwise,  as  Treasury  Stock. 

and   any   part   id'  the  Capital   Stock   that    has   not    1 n   subscribed    for  as  "I'll 

subscribed  Capital  Stock."  However,  "Unsubscribed  Treasury  Stock"  and 
' ' Unsubscribed  Capital  Stock"  could  be  used  to  distinguish  them. 


BOOKKEEPING  AND  ACCOUNTING 


147 


118.  Proposition  2:  Changing  to  a  Corporation.  W.  G.  Warner  &  Co., 
Wholesale,  a  partnership,  have  decided  to  change  to  a  corporation  and  con- 
tinue the  same  business,  using  the  same  name  and  the  same  books.  They  sub- 
mit the  following  Balance  Sheet,  and  request  you  to  make  the  change  in  their 
books. 

Balance   Sheet,   W.    C.   Warner  &   Co-    January   1.    192 


Cash 

Notes   Receivable 
Accounts  Receivable 
Mdse.    Inventory 
Office  Equipment 
Delivery  Equipment 


2500 

00 

4500 

00 

5600 

00 

5400 

00 

1000 

00 

1000 

00 

20000 

00 

Botes   Payable 
Accounts  payable 

W.    G.    Warner .Capital 
J.    C.   Adams,    Capital 


1500 

00 

3500 

00 

5000 

00 

8500 

00 

6500 

00 

20000 

00 

They  have  made  application  and  received  their  "Certificate  of  Incorpora- 
tion "'  under  the  laws  of  the  State  of  Ohio,  authorizing  a  Capital  Stock  of 
$15,000,  divided  into  150  shares  of  the  par  value  of  $100.  Since  the  "Nom- 
inal" accounts  in  their  books  have  been  closed  and  the  only  accounts  stand- 
ing open  are  those  shown  in  the  Balance  Sheet,  and  as  the  same  books  and  the 
same  accounts  are  to  be  continued,  it  is  not  necessary  to  close  any  accounts  ex- 
cept their  Capital  Accounts.  We  assume  that  their  Personal  Accounts  have 
been  closed  into  their  Capital  Accounts,  as  they  do  not  appear  in  the  Balance 
Sheet.  The  Capital  accounts  must  be  closed  because  no  account  is  kept  with 
the  stockholders  in  a  corporation.  The  entry  then,  to  change  the  books,  in- 
volves only  their  Capital  accounts,  and  the  Capital  Stock  account.  The  entry  to 
change  the  books  is  : 

January   1,    192 


W.  G.  Warner  &  Co.,  incorporated  under  the 
laws  of  the  State  of  Ohio,  on  January  1,  192  , 
with  an  authorized  capital  of  $15,000  divided 
Into  150  shares  of  the  par  value  of  $100. 

W.  G.  Warner.  Capital 

J.  C.  Adams,  Capital 

Capital  Stock 

For  150  shares  of  stock  accepted  by  W.  C. 
Warner  and  J.  C.  Adams  in  full  payment  of 
their  Interests  in  the  firm  of  W.  G.  Warner  & 
Co.,  85  shares  to  W.  G.  Warner  to  close  his 
account,  and  65  shares  to  J.  C.  Adams  to 
close  his  account,  and  ohange  the  books  to  a 
corporation  system. 


8500 
6500 


15000 


CO 


When  this  entry  is  posted,  the  partners'  capital  accounts  will  be  closed 
and  the  Capital  Stock  account  set  up.  No  other  entry  is  necessary,  as  the  same 
books  and  accounts  are  to  be  used.    The  stock  held  by  W.  G.  Warner  ami  by 

•  1.  0.  Adams  represents  their  interests  in  the  business. 


148 


BOOKKKKlMNi;  AND  ACCOUNTING 


1 19.  Proposition  No.  3.  W.  ( ;.  Warner  and  J.  C.  A. lam-  decide  to  open  an 
entirely  new  set  of  books,  and  you  are  given  the  same  Balance  Sheel  as  in 
Proposition  No.  2.  It  is  necessary  now  to  close  the  old  books,  and  open  the 
iic-u  books.    The  same  business  is  being  continued,  as  a  corporation,  and  the 

old  I ks,  being  a  pari  of  the  history  of  the  business,  should  show  the  facts. 

ournal  paper  and  prepare  the  journal  entries  from  the  Balance  Sheel  to 
close  the  old  books,  as  follows: 


January  1.  192 

l/ 

w. 

G.  7/arner  &.   Co. 

Cash 

rotes  Receivable 

Aocounts  Receivable 

Kdse.  Inventory 

Office  Equipment 

Delivery  Equipment 

To  close  the  asset  accounts 
and  transfer  them  to  W.  C. 
Warner  J.  Co.  as  per  agree- 
ment . 

2000C 

00 

2500 

4500 
5600 

r  ;rn 

1000 
1000 

00 
00 
00 
00 
00 
OO 

notes  payable 
Acconnt3  Payable 

W.  C  Warner  «  Co 

-1- 

To  close  the  liability  ac- 
counts and  transfer  them 
to  W.  G.  Warner  &  Co.,  as- 
sumed by  agreement. 

1500 
3500 

00 
00 

r  J00 

no 

W. 

G.  Warner  fc  Co.  Stock 
W.  0.  Warner  &.  Co. 

-1- 

For  stock  received  in  full 
payment  of  our  interests  In 
the  partnership. 

15000 

00 

15000 

00 

W. 
J. 

-1- 
G.  Warner.  Capital 
C.  Adams.  Capital 
W.  G.  Warner  &  Co. Stock 

To  close  the  partners'  Cap- 
ital accounts  and  to  dis- 
tribute the  stock  according 
to  their  interests;   85 
shares  to  W.  G.  Warner,  and 
65  shares  to  J.  C.  Adams 

6500 
6500 

00 
00 

15000 

00 

Use  ledger  paper  and  se1  up  the  accounts  shown  on  the  Balance  Sheel  and 
posi  the  above  journal  entries  to  the  Ledger  accounts,  which  will  show  the  old 

books  closed.  Rule  and  loot  the  accounts.  The  nexl  step  is  to  open  the  new- 
books.  Use  a  new  sheet  of  journal  and  Ledger  paper  and  prepare  and  post  the 
opening  entries  to  li-t  the  assets  and  liabilities  in  the  new  hooks,  as  follows: 

January   1.    192 


W.  G.  Warner  &  Co..  Incorporated  under  the 
lav.s  of  the  State  of  Ohio  on  January  1,  192  . 
with  an  authorized  oapital  of  £15,000,  divided 
into  150  shares  of  the  par  value  of  £100. 


Subscriptions 

Capital  stock 


65  shares  to  W.  G.  Warner. 
and  65  shares  to  J.  C.  Adams 
a3  per  subscription  list. 


-1- 


Cash 

Notes  Receivable 
Accounts  Receivable 
Mdse.  Inventory 
Office  Equipment 
Delivery  Equipment 
Botes  Payable 
Accounts  Payable 
Subscriptions 


Por  assets  accepted  and  lia- 
bilities assumed  In  full  pay 
mont  for  150  share3  of  the 
capital  stock  of  this  com- 
pany as  per  Minute  Sook  and 
Subscription  Book. 


15000 

00 

If  000 

00 

2500 

00 

4500 

or 

5600 

00 

5400 

00 

LO00 

00 

1000 

00 

1500 

00 

3500 

00 

15000 

00 

When  these  entries  .are  posted,  the  new  books  are  opened  and  the  accounts 
stand  ready  to  receive  the  business  for  the  coming  period.    It  would  he  aeces- 


BOOKKEEPING  AND  ACCOUNTING 


149 


sary  to  make  a  schedule  of  customers'  accounts  and  reconcile  them  with  Ac- 
counts Receivable,  $5,600.  This  schedule  should  be  copied  in  the  Journal  and 
posted  to  customers'  accounts  in  the  Sales  Ledger.  It  would  not  be  a  journal 
entry,  but  a  memoranda.  A  schedule  of  Accounts  Payable  should  be  treated 
in  the  same  way,  and  the  creditors'  accounts  opened  in  the  Purchases  Ledger. 
Also  a  schedule  of  Notes  Receivable  and  Notes  Payable.  These  schedules 
are  omitted  here.  Post  the  above  entries  to  Ledger  accounts  on  ledger  paper, 
and  prepare  a  Balance  Sheet.  Always  prepare  a  Balance  Sheet  immediately 
upon  opening  a  set  of  Books. 

120.  Proposition  4.  Consolidation:  A.  C.  Allyn  &  Co.,  a  corporation,  con- 
ducting a  hardware  business,  and  Johnson  &  Taylor,  a  partnership  in  the  same 
line  of  business,  have  agreed  to  consolidate,  and  have  organized  the  Akron 
Hardware  Co.,  incorporated  under  the  laws  of  the  State  of  Ohio,  on  January 
1,  192 — ,  with  an  authorized  capital  of  $150,000,  divided  into  750  shares  of 
Preferred  Stock  of  the  par  value  of  $100  and  750  shares  Common  Stock  of  the 
par  value  of  .$100. 

It  is  agreed  that  A.  C.  Allyn  &  Co.,  of  which  A.  C.  Allyn  and  E.  W.  Thomas 
are  the  only  stockholders,  shall  be  allowed  $15,000  for  the  Goodwill  of  their 
business,  and  that  Johnson  &  Taylor  shall  be  allowed  $10,000  for  the  Goodwill 
of  that  firm. 

»  Upon  this  basis,  A.  C.  Allyn  &  Co.  are  to  be  given  400  shares  of  Common 
Stock  and  400  shares  of  Preferred  Stock  of  the  Akron  Hardware  Co.  for  their 
business,  for  which  they  have  subscribed.  Johnson  &  Taylor  are  to  be  given 
178  shares  of  Preferred  Stock  and  178  shares  of  Common  Stock  of  the  Akron 
Hardware  Co.,  for  their  business  for  which  they  have  subscribed. 

Outside  parties  have  subscribed  as  follows:  W.  T.  Bigbee  for  125  shares 
of  Preferred  Stock  at  par  which  he  pays  for  in  cash,  and  E.  M.  Shepard  for  100 
shares  of  Common  Stock  at  par,  and  pays  for  75  shares,  $7,500,  in  cash,  and 
is  allowed  30  days  in  which  to  pay  for  the  remaining  25  shares.  This  leaves  47 
shares  of  Preferred  Stock  unsubscribed  and  72  shares  of  Common  Stock  un- 
subscribed. 

The  following  Balance  Sheets  of  these  concerns  are  submitted  to  you,  and 
you  are  asked  to  close  the  old  books  of  each  business  and  to  open  the  new  books 
for  the  Akron  Hardware  Co. 


Balance   Sheet   of  A.   C.   Allyn  &  Co.   January  1,    19 


Current  Assets: 

Ca3h       $4,650.00 
Petty  Cash     35.00 

.  4685 
12867 
28746 
18501 

00 
25 
50 
25 

64800 
31800 

00 
on 

Current  Liabilities 

Motes  Payable 
Account-s  Payable 

Fixed  Liabilities: 

Mortgage  payable 
Total  Liabilities 

Capital  Stock 
Surplus 

11800 

9  CO'1 

00 

00 

21600 

10000 

00 

00 

Notes  Receivable 
Aocts.  Receivable 
Mdse.  Inventory 

50000 
15000 

00 
00 

Total  Current  Assets 

1800 
2600 
2400 

25000 

00 
00 
00 

00 

Fixed  Assets: 

Office  Equipment 
Store  Fixtures 
Delivery  Equipment 
Real  Estate 

(Store  Building) 

31600 
65000 

"00 
00 

Total  Fixed  Assets 

95600 

0" 

96600 

00 

150 


BOOKKEEPING  AND  ACCOUNTING 


Balance  Sheet,  Johnson  1-  Taylor.  January  1,  19 


Current   Assets: 
Cash 

5400 
7500 
8900 

9500 

00 

oc 

CO 

oc 

31300 
1700 

00 
00 

Current    Liabilities: 

Kotea  Payable 
Aooounts  Payable 
Total  Llabllltlee 

J.  T.Johnson. Capital ,$13500 
Less   his 

Personal  Account          700 

2900 
4500 

00 

oo 

740C 
25600 

CO 

OC 

Aoota.    Hecelvable 
Udee.    Inventory 

12600 

i2eoo 

00 

CO 

Total  Current  Assets 

Fixed  Assets: 

750 
950 

oo 

Store   Fixtures 

N.M.Taylor .Capital     $13750 
Less  his  Personal 

Aooount                       950 

Total   Fixed   Assets 

33000 

00 

33000 

oc 

To  Close  A.  C.  Allyn  &  Co.:    The  firsl  sir,,  is  to  close  the  old  books  of  A 
('.  Allyn  &  Co.     Before  preparing  the  journal  entries  to  close  these  books, 
use  ledger  paper  on  which  to  sel  up  the  accounts  in  the  Balance  Sheet,  thai 
i.;.  copy  the  accounts  shown  in  the  Balance  Sheel  as  follows: 


( lapital  Stock 


||  Jan.  1     50000.00 

Surplus 

||  Jan.  1      151 

Cash 

Jan. 

1 

4G50.00  || 
Petty  Cash 

Jan. 

1 

35.00  j| 
Notes  Receivable 

Jan. 

1 

12867.25  || 
Accounts  Receivable 

Jan. 

1 

28746.50  || 
Merchandise  1  uventory 

Jan. 

1 

18501.25  || 

Goodwill 

Al 

cron  Hardware  Co.,  Pid.  stock 

Office  Equipi 


Jan.   1       1800.00 

Store  Fixtu 
•Ian.  1        2600.00  | 

Delivery  Equiprnenl 


Jan.  1 


2400.00  || 
Real  Estate 


Jan.  1      25000.00  | 

Notes  Payable 

Jan.  1       11800.00 

Accounts  Payable 

!  Jan.  1       9800.00 

Mortgage  Paj  able 

j  |  Jan.  1      10000.00 

Akron  Hardware  Co. 

IT 

Akron  Hardware  Co.,  Common  Stock 


Note:     Foul   new  accounts  are  opened  and  the  journal  entries  to  close  arc  to  1"'  posted 

to  tin'  abo  ':is. 

The  Goodwill,  $15,000,  allowed  A.  ('.  Allyn  &  Co.  is  an  accrued  profil  to 

thai  i cern  and  will  add  $15,000  to  their  presenl  Surplus,  and  the  i nun. 

"G Iwill,"   will   appear   as  an   asset.     The    Brs1    journal    entry    records   the 


BOOKKEEPING  AND  ACCOUNTING 


151 


Goodwill  and  credits  this  accrued  profit  to  Surplus.  The  Assets  and  Liabilities 
are  transferred  to  the  Akron  Hardware  Co.  by  one  journal  entry  to  close  the 
Assets  and  one  journal  entry  to  close  the  Liabilities.  Copy  the  following 
journal  entries  on  journal  paper,  and  post  them  to  the  Ledger  accounts  that 
have  been  set  up. 


January    1.    193 


Goodwill 
Surplus 


-1- 


Akron  Hardware  Co 
Cash 

Notes  Reoeivable 
Aooounts  Recelvaole 
Mdse-  Inventory 
Offloe  Equipment 
Store  Fixtures 
Delivery  Equipment 
Real  Estate 
Coodwill 


-1- 


Uotes  PayaDle 
Aooounts  Payable 
Mortgage  Payable 

Akron  Hardware  Co. 


Akron  Hardware  Co. 

Common  Stook 
Akron  Hardware  Co 

Preferred  Stook 
Akron  Hardware  Co 


Capital  Stook 
Surplus 

Akron  Hardware  Cc 

Common  Stook 
Akron  Hardware  Co 
Preferred  Stook 


For  value  of  Goodwill 
plaoed  on  this  Company 
by  agreement  ■ 

To  olose  the  assets  and 
Coodwill  agreed  upon  as 
an  additional  asset,  and 
to  transfer  them  to  the 
Akron  Hardware  Co..  as 
per  agreement 


To  olose  liabilities  of 
this  Company,  and  trans- 
fer them  to  the  Akron 
Hardware  Co.,  whioh  they 
assume  as  per  agreement 


For  400  shares  each  of 
Common  and  Preferreo 
Stook  received,  and  to 
close  the  latter  aooount 


To  olose  these  aooounts 
and  distribute  the  400 
shares  eaoh  of  Common 
and  Preferred  stook  tc 
our  etookholaers ,  upon 
the  surrender  of  theli 
stock,  in  the  ratio  of 
4/5  share  of  eaoh  com- 
mon and  Preferred  for 
one  share  of  the  stook 
of  our  oompany 


15000 


111600 


lie  oo 

9800 
10000 


40000 
40000 


50000 
30000 


CC 


oc 


15000 

00 

4685 

00 

12867 

25 

26746 

50 

18501 

25 

1800 

00 

2600 

00 

2400 

00 

25000 

00 

15000 

00 

31600 

00 

eoooo 

00 

40000 

00 

40000 

00 

Note:  A.  C.  Allyn  &  Co.  receive  400  shares  each  of  common  and  preferred  for  500 
shares  of  their  stock  or  400  or  4  of  a  share  of  each  common  and  preferred  for  one  share 

500    IT 
of  their  stock.  Their  Capital  Stock  was  $50,000  or  500  shares.  When  the  above  entries 
an-  posted  the  books  of  A.  C.  Allyn  &  Co.  will  be  closed.  Rule  and  foot  the  Ledger  accounts. 


To  Close  Johnson  &  Taylor :  The  next  step  is  to  close  the  old  books  of  John- 
son &  Taylor.  Before  preparing  the  journal  entries  to  close  these  books,  set  up 
the  accounts  as  shown  on  their  Balance  Sheet  on  ledger  paper  the  same  as 
was  done  with  the  accounts  of  A.  C.  Allyn  &  Co.  Balance  Sheet.  Use  a  separate 
sheet  of  ledger  paper.  Open  the  Capital  and  Personal  accounts  of  both  John- 
son ami  Taylor. 

ITavinn  opened  the  accounts,  use  a  separate  sheet  of  journal  paper  and  copy 
the  following  journal  entries  to  close  the  books  of  Johnson  &  Taylor  and  post 


152 


BOOKKEEPING   AND  AC<  OUNTING 


them  to  the  Ledger  accounts.  The  Goodwill,  $10, I,  is  an  accrued  profit  de- 
termined by  the  agreement  and  is  to  be  divided  equally  between  the  partners. 
One  entry  is  required  to  record  the  i  roodwilJ  and  divide  it  between  the  part- 
tij  to  close  the  partners'  Personal  accounts  into  their  Capital  ac- 
counts. One  entry  to  '-ins,,  the  Assets  and  transfer  them  to  the  Akron  Hard- 
ware Co.,  and  one  entry  ti  the  Liability  accounts  and  transfer  them  to 
the  Akron  Hardware  Co.  Then  one  entry  to  receive  the  stock  in  payment  Eor 
the  business,  and  one  entry  to  close  the  Capital  accounts  and  distribute  the 
stock. 


January 

1.  192 

Coodwlll 

J.  T.  Johnson.  Capital 
H.  U.  Taylor.  Capital 

To  divide  the  Coodwlll 
between  the  partners  as 
an  accrued  business  profit 
which  Is  allowed  by  the 
Akron  "Hardware  Co. 

1CC0O 

00 

SeOO 
5000 

00 
00 

-1- 

J  .T.Johns on, Capital 

::  .'J.. Taylor  .Capital 

J. T.Johnson, Personal 
K.M.Taylor, Personal 

To  close  the  partners 
Personal  accounts  Into 
their  Capital  accounts. 

700 
950 

00 
00 

700 

950 

00 
00 

-1- 
Akroc  Hardware  Co. 
Caah 

notes  Heoelvable 
Aoots.  Receivable 
Iildse.  Inventory 
Offloe  Equipment 
Store  Fixtures 
Coodwlll 

To  close  the  assets  In- 
cluding Goodwill,  allowed 
as  an  additional  asset, 
and  to  transfer  the  as- 
sets to  the  Akron  Hard- 
ware Co.  as  per  agree- 
ment . 

43000 

00 

5400 

7500 

6900 

9500 

750 

950 

10000 

00 
00 
00 
00 
00 
00 
00 

-1- 
Sotes  Payable 
Aocounts  Payable 

Akron  Hardware  Co. 

To  olose  the  liability 
acoounts  and  transfer 
their,  to  the  Akron  Hard- 
ware Co.,  which  they  as- 
sume as  per  agreement. 

2900 
4500 

CO 

7400 

00 

-1- 

Akron  Hardware  Co. 

Preferred  Stock 
Akron  Hardware  Co. 

Common  Stock 
Akron  Hardware  Co. 

For  176  shares  eaoh  of 
Preferred  and  Common 
Stock,  received  in  full 
payment  for  our  busi- 
ness. 

1760C 

17E00 

OC 

00 

25600 

00 

-l- 
J. T.Johnson,  Capital 
N.M.Taylor,  Capital 
Akron  Hardware  Co. 

Preferrld  Stock 
Akron  Hardware  Co- 
Common  Stock 

To  close  these  accounts 
and  distribute  the  stock 
received:  69  shares  each 
of  Preferred  and  Common 
stock  to  J.  T.  Johnson, 
and  89  shares  each  of 
Preferred  and  Common 
Stook  to  B.  K.    Taylor. 

17600 
17800 

00 
00 

17800 
17600 

00 
00 

When  these  journal  entries  are  posted  to  the  Ledger  accounts,  the  old  books 
of  Johnson  &  Taylor  will  be  closed.  Rule  and  fool  the  Ledger  accounts.  The 
next  step  is  to  open  the  new  books  Eor  the  Akron  Hardware  Co.  In  the  open- 
ing entry,  it  is  no1   necessary  to  list  the  subscribers  as  their  names  are  in  the 

Subscription  1 k.     The  fit        ■         records  the  Subscriptions  and  opens  the 

Capital  Stock  accounts  for  each  kind  of  stock.  The  nexl  two  entries  show  the 
subscriptions  paid  by  taking  over  each  business.  The  fourth  entry  records 
cash  r ived  for  the  subscriptions  from  outside  parties.     The  other  entries 


BOOKKEEPING  AND  ACCOUNTING 


153 


are  to  list  the  assets  and  liabilities  received  from  each  concern  and  record 
them  in  the  books  of  the  new  company.  Use  a  new  sheet  of  journal  paper 
and  record  the  following  journal  entries.     Study  each  entry  while  making  it. 


January   1.    19; 


The  Akron  Hardware  Co.  incorporated  under 
the  laws  of  the  State  of  Ohio,  January  1,  192 
with  an  authorized  oapital  of  $150,000  divided 
into  750  shares  of  preferred  stock  of  the  par 
value  of  $100  and  750  shares  of  oommon  stock 
of  the  par  value  of  $100 

Subscriptions  to  Preferred  Capital  Stock 
Subscriptions  to  Common  Capital  Stock 
Unsubscribed  Preferred  Capital  Stook 
Unsubscribed  Common  Capital  Stook 

Freferred  Capital  Stock 

Common  Capital  Stock 

Various  subscribers  to  the  Capital  Stook 
of  this  company  as  per  subscription  book. 

-1- 
Assets  of  A.  C.  Allyn  &  Co. 

Liabilities  of  A.  C.  Allyn  &  Co. 
Subscriptions  to  Preferred  Capital  Stock 
Subscriptions  to  Common  Capital  Sto'ok 

For  stock  issued  in  payment  for  the 
business  of  A.  C.  Allyn  &  Co.  as  per 
agreement . 

-1- 
Assets  of  Johnson  &  Taylor 

Liabilities  of  Johnson  &  Taylor 
Subscriptions  to  Preferred  Capital  Stook 
Subscriptions  to  Common  Capital  Stook 

Por  stock  issued  in  payment  for  the 
business  of  Johnson  &  Taylor. 


Cash 

Subscription  to  Preferred  Capital  Stook 
Subscription  to  Common  Capital  Stook 

Received  for  payment  of  125  shares  of 
Preferred  Stock  by  W.  T.  Bigbee,  and  100 
shares  of  Common  Stook  by  E.  U.    Shepard, 
both  at  par. 


70300 

67800 

4700 

7200 


111600 


43000 


20000 


CO 


00 


00 


75000 
75000 


31600 
40000 
40000 


7400 
17600 
17800 


12500 
7500 


The  journal  entries  to  list  the  assets  received  and  the  liabilities  assumed,  and 
record  them  in  the  hooks  of  the  new  corporation,  are  shown  in  the  following  il- 
lustration. Of  course,  schedules  should  be  prepared  for  Accounts  Receivable 
and  Accounts  Payable,  in  each  case.  These  schedules  should  be  copied  in  the 
Journal  and  posted  to  the  customers'  accounts  in  the  Sales  Ledger,  and  to  the 
creditors'  accounts  in  the  Purchases  Ledger.  After  this  is  done,  and  the  entries 
are  all  posted,  the  books  of  the  new  corporation  will  be  opened  and  stand  ready 
to  receive  new  business.  A  Balance  Sheet  should  then  be  prepared  to  show 
the  condition  of  the  business  at  the  beginning  of  the  new  business  and  after  the 
hooks  are  opened. 

Use  a  separate  sheet  of  ledger  paper  and  post  these  journal  entries  to  the 
new  Ledger  accounts.    When  these  entries  are  posted  the  books  of  the  new  cor- 


154 


I'.iMiKKEKPIXd   AND  ACCOUNTING 


poration,  Akron  Hardware  Co.,  will  be  opened  ready  to  receive  the  business 
For  i  he  coming  period. 

Janaury  1,  192 


Cash 

Kote3  Receivable 
Accounts  Receivable 
Kdse.  Inventory 
Office  Equipment 
Store  Fixtures 
Delivery  Equipment 
Real  Estate 
Coodwlll 

Assets  of  a.  C.  Allyn  &  co 


Liabilities  of 

A.  C.  Allyn  &  Co. 

Notes  Payable 
Acots.  Payable 
Mortgage  Payable 


To  list  the  assot3  of 
A .  C.  Allyn  &  Co.  ac- 
quired from  thut  con- 

.  and  to  close  the 
assets  of  A.  C.  Allyn 
&  Co.  acoount • 


TO  ll3t  the  liabil- 
ities of  A. C. Allyn 
&  Co.  assumed  by  us 
and  to  olose  the 
Liabilities  of 
A.  C.  Allyn  &  Co. 
aooount . 


•1- 


Cash 

Notes  Jeoelvable 
Accts.  Receivable 
lOdse.  Inventory 
Office  Equipment 
Store  Fixtures 
Goodwill 
Assets  of 

Johnson  &  Taylor 


Liabilities  of 

Johnson  1  Taylor 
Kotes  Payable 
Accounts  Payable 


To  list  the  assets  ac 
quired  from  Johnson  t 
Taylor  and  to  close 
the  'Liabilities"  of 
Johnson  &  Taylor  ao- 
oount . 


To  list  the  liabili- 
ties of  Johnson  4 
Taylor  assumed  by  us, 
and  to  close  Liabili- 
ties of  Johnson  &  Tay 
lor  account. 


4665 

CO 

12867 

2S 

26746 

50 

18501 

25 

1600 

CO 

2600 

00 

2400 

00 

25000 

OC 

15000 

0  0 

111600 

00 

31600 

00 

11600 

CO 

9600 

00 

10000 

00 

5400 

00 

7500 

00 

I  JOC 

00 

75  00 

00 

750 

00 

950 

00 

100CO 

00 

43000 

00 

7400 

00 

2900 

00 

4500 

00 

After  posting  these  opening  entries,  it  is  usual  to  prepare  ;i  Balance  sheet 
to  show  the  condition  of  the  books.  Prepare  this  Balance  Sheet.  It  the  en- 
tries have  been  properly  made  and  correctly  posted,  the  Balance  Sheel  should 
appear  as  follows ; 


Balanoe  Sheet 

Akron  Hardware  Co.  January  1,  19! 

Current  Assets: 

CaBh 

Notes  Receivable 

3C085 
20367 
37646 
28001 

2500 

00 

se 

60 

25 

00 

116600 
56500 

0  0 
00 

Current  Liabilities: 

Uotes  Payable 
Acots.  Payable 
Total  Current  Lia- 
bilities 

Fixed  Liabilities. 

Mortgage  Payable 
Total  Liabilities 

Preferred 

Capital  Stock 
Less  unsubscribed 

Preferred  Stook 

Common  Capital  Stook 
Less  Unsubsorlbed 
Common  Capital  Stock 

14700 

11300 

OC 

J<3 

29000 
10000 

00 
00 

Aooounts  Receivable 
Udse.  Inventory 
Subscription  te  Com- 
mon Capital  Stock 

75000 
4700 

oo 
oo 

Total  Current  Assets 

2550 
3550 
2400 

25000 

25000 

00 

00 
00 

00 

o: 

Fixed  A6sets. 

Office  Equipment 
Store  Flxturea_ 
Delivery  Equipment 
Real  Estate, 

39000 

70300 

67600 

00 

00 
00 

Store  Building 
Coodwlll 

75000 
7200 

DO 
00 

Total  Fixed  Assets 

177100 

oc 

177100 

00 

ILI.VSTRATION    NO.    CS.      BALANCE    SHEET,    CORPORATION 


BOOKKEEPING  AND  ACCOUNTING  155 

121.  Discount  and  Premium:  The  "face  value"  of  a  certificate  of  stock  is 
its  "par  value."  The  par  value  of  stock  may  be  $1,  $5,  $10,  $25.  $50  or  $100 
The  par  value  is  printed  on  the  face  of  the  stock.  When  stock  is  sold  below 
par,  it  is  sold  at  a  discount,  and  when  sold  above  par,  it  is  sold  at  a  premium. 
I 'nit  stock  sold  and  issued  above  par  or  below  par  does  not  reduce  nor  increase 
the  Capital  .Stock  as  shown  by  the  Capital  Stock  account. 

The  Central  Foundry  Co.  is  incorporated  with  an  authorized  capital  of 
$100,000,  divided  into  1000  shares  of  par  value  of  $100.  If  subscriptions  have 
been  accepted  at  '"90"  (which  means  10%  below  par  or  a  discount  of  10%), 
what  is  the  opening-  entry? 

Omitting  the  preliminary  wording  for  the  opening-  entry,  the  journal  en- 
tries would  be  as  follows: 

Subscriptions    $90,000.00 

Discount  on  Stock  10,000.00 

Capital  Stock   $100,000.00 

Then,  for  receipt  of  payment  from  the  subscribers  and  the  issuing  of  the 
stock,  the  following: 

Cash   $90,000.00 

Subscriptions    $90,000.00 

"Discount  on  Stock"  account  shows  on  the  books  as  a  debit  balance,  and 
really  shows  a  loss.  Every  debit  is  an  asset  or  a  loss,  and  it  certainly  is  not 
an  asset.  It  would  not  be  the  proper  thing  to  write  off  this  $10,000  to  Profit 
and  Loss  at  the  end  of  the  period,  because  it  is  not  a  loss  sustained  by  one  period, 
but  by  many  periods  to  come.  A  certain  part  of  it  should  be  written  off  each 
year,  whatever  amount  seems  proper,  considering  the  progress  of  the  business, 
and  the  remainder  allowed  to  appear  in  the  Balance  Sheet  as  if  it  were  an 
asset,  until  it  is  all  written  off. 

Suppose  the  Central  Foundry  Co.  had  received  subscriptions  at  "115" 
(15%  above  par  or  15%  premium),  wdiat  entry? 

Still  the  Capital  Stock  must  show  exactly  the  authorized  capital.  The 
actual  capital  of  the  company  now  is  $100,000  plus  $15,000,  but  the  $15,000  is 
Surplus,  and  represented  by  the  "Surplus"  account.  It  would  appear  in  the 
Balance  Sheet  as  a  credit  balance.  Omitting  the  preliminary  wording,  the 
opening  entry  would  be: 

— 1— 

Subscriptions     $11 5.000.00 

Capital   Stock     $100,000.00 

Surplus   15,000.00 

— 1— 

Cash    $115,000.00 

Subscriptions    $115,000.00 

When  these  entries  are  posted,  the  Subscriptions  account  will  be  closed  and 
the  Capital  Stock  and  the  Surplus  accounts  will  be  set  up. 

122.  Bond  Issues:  When  a  corporation  decides  to  do  some  financing,  that 
is,  raise  funds  for  enlargement  or  betterment  or  in  order  to  carry  on  the  in- 
creased volume  of  business,  the  usual  methods  are  to  issue  short  time  notes  to 
be  sold  to  investors,  or  if  the  funds  are  needed  for  a  longer  period  of  years, 
mortgage  bonds  are  issued  to  be  sold  to  investors  commonly  called  "Bonds." 
These  bonds  are  secured  by  a  mortgage  on  the  property  of  the  company. 

Suppose  the  Central  Foundry  Co.,  incorporated  for  $100,000,  has  issued  all 
of  its  stock  at  par  and  has  virtually  all  the  money  invested  in  the  business, 


156  BOOKKEEPING  AND  ACCOUNTING 

and  lias  decided  to  borrow  $50,000  by  issuing  10  year  bonds  secured  by  a  first 
mortgage  on  its  property.  It'  these  bonds  were  all  subscribed  and  paid  for  in 
cash,  the  entry  would  be  simply : 

Cash    $50,000 

First  Mortgage  Bonds  Payable o00 

but  suppose  the  entire  issue  were  placed  in  the  hands  of  underwriters  ti 
sold,  and  the  underwriters  charged  ■"''.    or  $2,500  for  their  services,  and  the 
bonds  arc  taken  at  par.     What  entry  .' 

Cash    $47,500 

Underwriting  Expense   2..~>00 

First    Mortgage   Bonds   Payable    $50,000 

The  Underwriting  Expense  $2,500  would  be  written  off  the  same  as  "Dis 
cciuiit  on  Stock, "  already  explained.    Bui  suppose,  instead  of  a  fixed  underwrit- 
ing expense  as  above,  the  bonds  ;nv  taken  by  bond  houses  at  "93,"  thai  is  7', 
below  par.    What  entry  ! 

Cash     $46  ' 

Discounl  on  Bonds :i..">(i(i 

First   Mortgage  Bonds  Payable  >:hi,000 

This  "Discounl  on  I'. Is"  should  be  written  off  the  same  as  "Discount  on 

Stock,"  explained    before.      Again,  suppose.   as   is   sometimes  done,   the  company 

should  offer  one  share  of  unsubscribed  stock  as  a  bonus  with  each  $1,01  0  bond, 
as  an  inducement  to  investors,  and  the  bond  houses  tool;  the  bonds  and  the 
bonus  stock  at  "96"  for  the  bonds.      What  entry.' 

Cash  $48, i 

Stock  Bonus  5,1  00 

Discounl   on   I! is L'.OOO 

Fust  Mortgage  Bonds  Payable $50,1 

l  Qsubscribed  stock o.nOO 

Both  the  Stock  Bonus  and  the  Discount  on  Bonds  would  be  written  off  from 
lime  to  time  the  same  as  Discounl  on  Stock  previously  explained.  Of  course 
if  Treasury  Stock  were  given  as  the  bonus,  the  term  '■Treasury  Stock"  would 

be  Used   instead  of  "1    n subscribed   Stock." 

123.  Dividends:  Thai  pan  of  the  profits  which  the  board  of  directors  may 
decide  shall  be  paid  to  stockholders  is  called  a  "Dividend."  It  is  not  usual  and 
would  not  be  wise  for  a  corporal  ion  to  pa}  out  all  of  the  profits  in  dividends  to 
ickholders  each  year,  for  then  the  corporation  would  be  in  no  better  condi- 
tion after  a  number  of  years  than  it  was  when  it  began.  U  is  the  part  of  wis- 
dom and  g 1  financing  to  withhold  or  reserve  a  considerable  pari  of  the  net 

dues  each  year.     These  profits  withheld  will  appear  in  the  Surplus  ac- 
count and  in  the  reserve  accounts,  Reserve  for  Bad   Debts,  Reserve  for  De 
preciation,  Reserve  for  Taxes,  etc.    Stockholders  are  no1  entitled  to  dividends 
until  the  board  of  directors  have  by  vote  "declared  a  dividend." 

The  net  profil  of  a  corporation  is  determined  exactly  the  same  as  the  nel 
profit  in  an.\  other  business.  Only  the  entries  for  the  distribution  of  the 
profits  at  the  end  id'  a  period  is  different  from  that  of  a  partnership  or  a  sob- 
proprietor. 

The  Union  steel  <',,   is  incorporated  with  an  authorized  capital  of  $100 

divided    into     1,000    shares    of    the    pal'    vain -'  850    shares    0,      --  1 1    0f 

I  he  stock  has  been  issued  to  stockholders,  and  1  51  i  shares  or  $15,000,  of  the  stock 
is    unsubscribed.      At    the   end   of  the    fiscal    period,    the    Profil    and    LOSS   State- 


BOOKKEEPING  AND  ACCOUNTING  157 

ment  shows  a  net  profit  of  $15,300,  after  all  depreciation  is  written  off,  and 
the  usual  reserve  accounts  set  up.     The  Hoard  of  Directors,  at  a  regular  meet 
ing,  have  declared  a  dividend  of  10',    or  $10  a  share,  and  instruct  that  the  re- 
mainder of  the  net   profit   be  carried  to  Surplus.     The  entry  to  close  the   Profit 
and  Loss  account  and  distribute  the  net  profit,  is  as  follows: 

Profit  and  Loss $15,300.00 

Dividend  No.  1   $8,500.00 

Surplus    6,800.00 

The  10','  dividend  can  apply  only  on  the  stock  that  has  been  issued  $85,000 
or  850  shares.  When  this  entry  is  posted,  the  Profit  and  Loss  account  is  closed, 
"Dividend  Xo.  1"  account  is  opened  and  the  remainder  of  the  profit  is  trans- 
ferred to  Surplus. 

Now,  as  cheeks  are  sent  to  each  stockholder  for  his  part  of  the  dividend. 
Debit  "Dividend  No.  1"  on  the  credit  side  of  the  Cash  Book,  and  when  the 
dividend  is  all  paid,  "Dividend  No.  1"  account  will  be  closed.  Dividend  No. 
1  would  indicate  that  this  is  the  first  dividend  paid,  and  subsequent  dividends 
would  be  designated  as  Dividend  No.  '2,  and  so  on,  numbered  consecutively. 

It  may  happen,  in  some  eases  that  one  or  more  dividend  checks  may  be 
returned  on  account  of  wrong  address,  and  the  stockholder  cannot  be  located 
at  present.  The  returned  check  is  canceled  and  an  entry  made  in  the  Cash 
Book,  crediting  "Unpaid  Dividends"  on  the  debit  side  of  the  Cash  Book,  and 
this  account  would  stand  open  until  the  party  or  parties  were  located  and 
the  amount  paid. 

In  a  large  corporation  where  there  are  a  large  number  of  stockholders,  a 
Transfer  Book  is  kept  to  show  the  various  transfers  of  stock.  This  book  is 
posted  to  the  Stock  Ledger.  A  Dividend  Book  is  kept  to  show  the  dividend  to 
which  each  stockholder  of  record  is  entitled.  A  check  is  issued  for  the  en- 
tire amount  of  the  dividend  and  deposited  in  a  separate  bank  account  under 
an  appropriate  name.  Then  checks  are  drawn  on  this  account  for  each  stock- 
holder. The  purpose  is  to  segregate  the  work  where  a  large  number  of 
dividend  checks  are  to  be  sent  out  a  number  of  times  a  year,  probably  every 
three  months.  In  this  way  this  vast  amount  of  check  writing  and  detail  in 
keeping  the  Transfer  Book  and  Dividend  Book  and  Stock  Ledger  can  be  made 
independently  of  the  regular  bookkeeping,  and  put  in  charge  of  a  separate  set 
of  clerks. 


GHAPTEB  VII 

SPECIAL  COLUMN  JOURNAL— CASH  JOURNAL 

li't.  This  Special  Column  Journal  combines  the  four  books  of  original  en- 
try. Purchases  Book,  Sales  Book,  (ash  Book  and  Journal,  into  one  book.  The 
purpose  of  it  is  to  show  to  what  extent  special  columns  may  he  used.  This 
Form  may  be  adapted  to  a  trading  business  as  shown  here,  or  it  may  be  adapted 
to  a  non-trading  business,  such  as:  Law  Office,  Architect,  or  other  professional 
firms,  or  to  a  Hospital  or  Social  Organization,  by  simply  using  the  headings  for 
the  special  columns  that  the  nature  of  tic  business  may  require. 

12">.  The  columns  to  the  left,  the  ('ash  Columns,  show  the  cash  received  and 

paid  out,  and  is  the  Cash  account.  The  difference  between  the  total  tit'  the  two 
columns  is  the  cash  balance  at  any  date.  The  cash  balance  is  taken  to  the  Trial 
Balance  at  the  end  of  the  month,  the  same  as  if  it  were  a  Ledger  account.  No 
items  are  posted  from  these  columns. 

126.  Post  the  items  in  the  General  column  only,  and  post  the  footing  of  all 

special  columns  at  the  end  of  the  month.  Check  every  item  that  cues  in  a 
special  column  to  show  it  is  not  to  he  posted  unless  the  item  should  appear 
on  the  same  line  with  an  item  in  the  General  column,  that  must  he  posted.  In 
posting  payments  received  from  customers  who  gel  a  discount,  posl  both  items 
to  the  credit  of  the  customer's  account  the  same  as  you  did  in  the  first  Cash 
Hook'.  In  posting  payments  to  creditors  where  a  discount  is  received,  post  both 
items  to  the  debit  of  the  creditor's  account.  Where  an  entry  requires  two  lines 
to  make  the  entry  plain,  use  only  one  date,  that   is,  use  the  date  hut  once. 

127.  Each  page  of  this  Cash  Journal  must  he  proved  at  the  time  the  foot- 
ings of  the  columns  are  carried  forward  to  a  new  page.  The  total  of  all  the 
debit  columns  must  equal  the  total  of  all  the  credit  columns,  except  that  the 
Purchases  Discount  column  and  the  Sales  Discount  column  are  omitted  in  the 
proof,   because  these  columns  are  posted   to  both   the  debit   and   credit   sides  of 

the  Ledger. 

128.  The  student  will  use  the  business  transactions  of  Chapter  TV  for 
this  set.  Page  the  books  ami  write  the  headings  for  the  special  columns  as  in 
the  following  illustrations.  After  the  transactions  are  recorded  and  posted, 
prepan  a  Trial  Balance,  Balance  Sheet.  Profil  and  l.oss  Statement,  and  (dose 
the  books.  The  only  inventory  to  be  used  at  the  end  of  this  set  is  Mer- 
chandise Inventory,  .May  31,  $12,876.40.    No  adjustment  entries  are  to  be  made. 

120.  As  the  transactions  in  this  business  are  exactly  the  same  as  in  D.  L, 
Morrison  &  Co.,  Chapter  IV.  where  the  adjustments  were  made,  it  will  be  inter 

i  -tinLr  to  compare  the  net  profil  shown  by  the  1'rolit  and  Loss  Statement  with 
the  net  profil  here  where  the  adjustments  are  not  made.  Two  pages  of  the 
work  are  shown  here  to  show  how  the  transfer  to  a  new  page  IS  made  when  a 
page  is  filled,  ami  the  last  part  is  shown  in  order  to  illustrate  the  posting  and 
paging   when   posting   the  special   columns.      Accountants  have   made  objections 

to  the  ('ash  Journal  on  account  of  insufficient  explanations,  making  it  difficult 

to  properly  audit  the  books,  ('arc  should  be  exercised  to  make  the  explanation 
clear  in  each  ent  ry. 

158 


BOOKKEEPING  AND  ACCOUNTING 


159 


ll.ll 


BOOKKEEPING  A\I>  ACCOUNTING 


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CHAPTEB  VIII 
A  SYSTEM  OF  ACCOUNTS  FOR  RETAIL  MERCHANTS 

131.  There  is  a  tendency  among  retail  merchants  to  keep  their  books  in  a 
way  that  does  not  show  tin-  results  aecessarj  to  give  tin-  required  information 
tor  the  best  management  of  tin-  business.  T uany  keep  only  personal  ac- 
counts and  '-ash.  or  single  entrj  books,  which  do  not  show  the  costs  of  doing 
business.  The  buying  price  of  goods  is  onlj  a  part  of  tin1  actual  cost.  Every 
expense  adds  t"  I  be  cosl . 

L32.  A  merchanl  must  know  his  overhead  expenses  and  their  relation  to  the 

amount  id'  goods  sold,  as  w.dl  as  the  buying  cost,  in  order  to  price  the  ■-: Is 

intelligently,  lie  must  know  the  financial  condition  of  the  business  in  order 
to  manage  it  properly.  Competition  often  compels  the  merchanl  to  make  close 
prices,  and  he  should  positively  know  the  limit  to  which  he  may  go  without 
loss.  Banks  are  giving  more  and  more  attention  to  the  accounting  methods  of 
merchants,  in  the  matter  id'  credit.      A  merchant   who  can  show  a  statement   id' 

his  business  that  means  progress  and  careful  study  of  the  Iiumhons.  win  receive 

more  consideration,  with  the  same  assets,  than  one  who  cannot. 

133.  The  liest  system  of  accounts  fur  any  business  i~  one  which  will  furnish 
the  required  information  with  the  least  effort.  Goods  uo1  priced  high  enough 
to  cover  the  cost  of  the  -noils  and  tin-  overhead  expenses,  arc  sold  at  a  loss.  A 
convenient  way  to  arrive  at  the  percentage  of  overhead,  is  to  take  the  operating 
expense  for  the  |>ast  period  six  months  or  a  year — and  find  the  per  cent  of 
net  sales.  For  instance,  if  a  merchant's  sales  last  year  weri  -  iO.OOO  and  his 
total  operal  ing  expenses  were  $10,000,  his  overhead  expense  was  20'  I  i  $10,000 
divided  by  $50,000).      If  he  decides  he  should   have  a  net  profit   of  'JO',    on  the 

Is  sold,  he  should  add  20 %   profit  to  the  20^!   overhead,  which  'ji\cs  10%. 

Then  10091  less  In'  ,  .  or  60'  .  is  the  invoice  est.  The  cost  of  any  article  divided 
by  (id  will  give  the  sdline-  price.  If  an  article  cosl  $1.50,  the  selling  price  is 
$1.50  divided  by  bn\  or  $2.50.  If  an  article  cost  $7.50,  then  *7,">d  divided  by 
,   is  $12.50,  the  selling  price. 

134.  Turnover:  The  rapidity  of  "turnover"  is  an  important  element  in  a 
retail  Kumiicss.  •'Turnover"  means  the  number  of  times  the  entire  stock,  or 
the  stock  of  any  department  is  all  sold  and  replaced,  during  the  year  or  any 
period.  To  ascertain  the  turnover,  divide  the  "cost  of  the  goods  sold"  by  the 
average  stock  carried.  For  instance,  a  merchant  carries  an  average  stock  of 
$15,000  and  at  the  end  of  the  year  finds  the  "cosl  of  the  goods  sold"  was  $60,000. 
He  has  turned  his  stock  four  times.  $60,000  divided  by  $15,000  A  slow 
turnover  may  he  due  to  poorly  selected  stock,  or  to  poor  judgmenl  in  buying, 
or  overstocking  by  buying  too  much,  or  it  may  lie  due  to  inefficient  selline 
ability.  After  careful,  .judicious  buying  and  properly  pricing,  no  ell'ort  should 
be  spared  to  increase  the  turnover  to  the  maximum. 

135.  This  system  of  accounts  can  be  applied  to  a  small  business  or  1o  a  large 
department  store.  Departments  are  not  used  in  this  set.  but  it  will  be  shown 
how  easily  the  departments  can  be  provided  for.  and  the  system  would  be  the 
same. 

136.  The  1 ks  to  be  used  are  Journal,  Cash  Book,  Purchases  Book,  Petty 

('ash  Book,  General  Ledger,  Sales  Ledger,  and  Purchases  Ledger.  In  a  small 
business  the   Purchases  Ledger  may  be  omitted,  and  the  creditors'  accounts 

162 


BOOKKEEPING  AND  ACCOUNTING 
JULY  1.  192 


163 


Accts, 
Pay. 


Accts. 
Rec. 


201 


103 


1285 


127 


::. 


s.-, 


:;\- 


."id 


o.-, 


25 


1800 
13225 

975 
1025 

975 


5500 
13500 


11 


60 


13 


26 


II.  J.  Brown  and  J.  M.  Stone 
have  formed  a  partnership  ac- 
cording to  Articles  of  Copart- 
nership signed  and  executed  this 
day.  The  business  is  to  be  con- 
ducted under  the  name  of  H.  J. 
Brown  &  Co.  and  the  partners 
are  to  share  profits  and  bear 
losses  in  proportion  to  their  in- 
vestments. Each  partner  is  to 
receive  a  salary  of  $150  a  month. 
Their  investments  are  as  follows: 

Cash 

Merchandise  Inventory 
Office  Equipment 
Store  Fixture 
Delivery  Equipment 

H.  J.  Brown,  Capital 
Investment  as  per  agreement. 

— 1— 
<  lash 
Building 

Mortgage  Payable 

J.  M.  Stone,  Capital 
Investment  as  per  agreement. 


Accounts  Receivable 

Sales 
Charge  tickets  of  the  day's  sales. 

— 3— 
Account  Receivable 

Sales 
Charge  tickets  of  the  day's  sales. 

— 3— 

Sales  Returns  and  Allowances 

Accounts  Receivable 
Credit  tickets  for  the  day. 

—4— 

J.  H.  Mann  &  Co. 
Notes  Payable 
Purchases  Discount 

Cave  15  day  acceptance  and  re- 
ceived 3%  discount. 

— 4— 
Royce  Bros. 

Purchase  Returns  and  Allow- 
ances 
Returned     goods    from     Invoice 
No.  2 

—4— 
Accounts  Receivable 

Sales 
Charge  tickets  of  the  day's  sales. 


14 


General 


I  Mil  HI 


7000 
12000 


lie 


1247 
38 


85 


,\i  rls. 

Rec. 


Sllle; 


11 


201 


103 


50 


05 


i  in 


342 


25 


ILLUSTRATION   NO.   12.      SIX  COLUMN   JOURNAL 


[64 


BOOKKEEPING  AND  ACCOUNTING 


i  in  the  General  Ledger.  All  th<  Ledger  accounts  may  be  kepi  in  i 
Ledger,  but  in  that  case  the  customers'  accounts  should  l><-  given  a  separate 
section  in  the  book  and  that  section  treated  as  a  Sales  Ledger,  controlled  bj 
Accounts  Receivable  account.  The  creditors'  accounts  should  he  given  a  sepa 
rate  section  and  treated  as  a  Purchases  Ledger,  i trolled  by  "Accounts  Pay- 
able." This  will  save  much  time  ami  labor  in  preparing  the  Trial  Balance  each 
month. 

137.  Xo  Sales  Book  is  kept,  as  the  sales  are  represented  by  tickets.  There 
air  four  kinds  of  tickets:  (  barge  Tickets,  (ash  Tickets,  Credil  Tickets  ami 
i  lollection  Tickets.  These  tickets  are  kept  separate,  ami  after  being  entered  in 
the  books  at  the  end  of  the  day.  are  tiled  separately  by  dates.  I'm-  reference. 

1  18.  The  ordinary  two  column  Journal  and  the  ordinary  Cash  Book  may  be 
used,  hut  as  the  controlling  accounts,  "Accounts  Receivabli  "  and  "Accounts 
Payable"  are  used,  special  columns  are  required  in  these  books.  If  a  Cash 
Register  were  used,  it  would  control  the  cash  for  each  day.  but  would  not  affecl 

nor  change  the  1 kkeeping.     With  the  illustrations  given  here,  the  student 

will  readily  understand  how  to  make  any  entry  for  any  transaction  in  this  set. 

Tin.  The  following  illustrations  show  the  form  of  Journal  and  Cash  Book. 
The  form  id'  the  Purchases  Book  and  of  the  Petty  Cash  Book  is  the  5  the 

forms   with   which   the   student    is   already    familiar.     These   two   books  are 

kept  and   posted   the  same  as  in  Chapter  VI. 

1-10.  Post  tin-  items  not  clucked  only,  from  the  Journal.  Check  the  items 
that  go  in  Special  Columns  at  the  time  entry  is  made.  The  special  columns  arc 
necessary  in  the  -Journal  on  account  id'  the  controlling  accounts.  If  the  con- 
trolling accounts  were  not  used,  these  special  columns  would  he  unnecessary. 
Only  a  few  of  the  .journal  entries  are  given  to  show  how  the  entries  are  made. 
At  the  end  of  the  month,  the  total  of  Accounts  Payable  column  is  posted  tn  the 
deldt  .if  Accounts  Payable  account  in  the  General  Ledger.  The  total  of  Ac- 
counts Receivable  column  on  the  debil  side  of  the  Journal  is  posted  to  the  ,]■ 
of  Accounts  Receivable  and  the  total  mi  the  credit  side  is  posted  to  the  credit  ul' 

Accounts  Receivable  in  the  <  feneral  Ledger.     The  total  of  Sales  column  is  posted 
to  the  credit  of  Sales  account. 


^^ 


&**^s 


ILLUSTRATION 


T  SIDE   •  '!■'  CASH   HOOK 


Ml.    ('heck  each   item  that    goes   in  a   special  Column  at    the  time  the  entry  is 

made,  the Iv   the   items   not    checked  are  to   he   posted.      In  a   small   business 

where  it   is  not  desired  to  keep  a   Sales   Ledger,  the   Accounts  Receivable  column 


BOOKKEEPING  AND  ACCOUNTING 


165 


would  not  be  necessary,  but  the  Sales  column  should  be  used  in  any  ease.  At 
the  end  of  the  month,  the  total  of  Accounts  Receivable  column  is  posted  to  the 
credit  of  Accounts  Receivable  account  in  the  General  Ledger,  and  the  total  of 
Sales  column  is  posted  to  the  credit  of  Sales  account.  In  the  fifth  entry  from 
the  top,  when  this  entry  is  made  in  the  Cash  Book,  the  tickets  that  make  up  the 
$125  are  posted  to  the  credit  of  the  customer's  accounts  in  the  Sales  Ledger 
direct  from  the  tickets,  and  the  tickets  are  fastened  together  and  filed  under 
the  date  of  July  3,  for  reference.  If  desired,  the  customers'  names  may  be 
entered  in  the  Cash  Book  from  the  tickets  and  the  amount  of  each  entered  in 
Accounts  Receivable  column.  Then  these  separate  amounts  would  be  posted 
to  the  credit  of  customers'  accounts  from  the  Cash  Book.  It  simply  saves  space 
and  writing  to  make  the  entry  as  shown  above.     The  result  would  be  the  same. 


( — m  -J^f-i  - 


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V        I 


ILLUSTRATION   NO.   74.      CREDIT   SIDE   OP   CASH  BOOK 


142.  Prom  the  credit  side  of  the  Cash  Book,  post  each  item  in  the  General 
column  to  the  debit  side  of  the  Ledger  account  written  on  the  same  line  with 
it.  Post  each  item  in  the  Accounts  Payable  column  to  the  debit  of  the  account 
written  on  the  same  line  with  it,  and  on  the  next  line  in  the  Ledger  account  post 
the  item  in  Purchases  Discount  column. 

143.  At  the  end  of  the  month,  post  the  total  of  Accounts  Payable  column  to 
the  debit  of  Accounts  Payable  account  in  the  General  Ledger.  The  total  of 
Purchases  Discount  column  is  posted  to  the  credit  of  Purchases  Discount  account 
and  also  to  the  credit  of  Accounts  Payable  account  in  the  General  Ledger. 

144.  To  ascertain  the  cash  balance,  find  the  total  of  all  three  columns  of  the 
debit  page  of  the  Cash  Book  and  from  this  total  deduct  the  total  of  the  first  two 
columns  of  the  credit  page  of  the  Cash  Book.  The  Purchases  Discount  column 
is  not  included,  because  it  is  not  cash. 

145.  Preference  of  Form:  If  it  is  desired  to  use  only  Journal  and  Ledger, 
the  entries  can  all  be  made  in  the  Journal,  using  the  tickets  exactly  the  same 
as  shown  in  this  set.  If  it  is  desired  to  use  the  ordinary  two-column  Journal 
and  the  ordinary  form  of  Cash  Book  without  special  columns,  the  entries  would 
be  made  the  same  as  in  the  form  shown  here.  Some  merchants  have  the  idea 
that  the  fewer  honks  they  have  to  keep  the  less  the  work  required  to  keep  them. 
A  mistaken  idea.     The  purpose  of  the  Cash  Book  is  to  eliminate  all  cash  trans- 


161  BOOKKEEPING   AND  ACCOUNTING 

actions  from  the  Journal.  This  shortens  the  Journal.  It  takes  loss  writing 
lo  make  an  entrj  in  the  Cash  Book.  The  cash  is  segregated  .-ill  in  one  book, 
which  is  far  more  satisfactory.  The  purpose  of  the  Purchases  Book  is  to  take 
all  transactions  for  the  purchase  of  merchandise  ou1  of  the  Journal.  This 
shortens  the  Journal  and  segregates  all  the  purchases  of  merchandise  in  one 
ik,  which  is  more  convenienl  for  reference  and  more  satisfactory  in  every 
way.  Whatever  form  of  bookkeeping  is  being  used  in  ;i  business,  ii  is  easy  to 
change  to  this  form. 


Business  Transactions 

July    1.  II.  -I.  Bi  d  J.  M.  Stone  have  formed  a  partnership  according  to 

Articles  of  Copartnership  signed  ami  executed  tins  day.  The  busi- 
ness  is  to  be  conducted  under  the  name  of  11.  -I.  Brown  &  Co.,  ami  the 
partners  are  to  share  profits  ami  bear  hisses  in  proportion  to  their 
investments.     Bach  partner  is  in  receive  a  salary  "i'  +1-"'11  a  month. 

Their  investments  air  as  follows: 

Cash  $1,8 

Merchandise  Inventory 13,225.00 

( >ffice  Equipmenl 975.00 

Store  Fixtures 1  .<  125.00 

Delivery  Equipment  1)75.00 

II.  J.  Brown,  Capital $18,000.00 

Investment  as  per  agreement. 

Cash  -  5,i .00 

Building  occupied  by  the  store 13,500.00 

Mortgage  Payable, 

dated  July  1.  r,\ $  7,000.00 

J.  M.  Sto,,,..  Capital 12,000.00 

Investment  as  per  agreement. 

Check  the  i  e   h  iti  ma  in  the  Journal  and  enter  the  cash  on  the  debit  side  of  tlio 
c.-isli  Book  in  the  General  column,  and  check  the  cash   items  there.     The  ••heck 
shows   these   items  are   no)    to  be   posted.    Open  all  the  above  accounts   in 
General   Ledger,  except   cash.     The  Cash  Book  is  the  Cash  account. 

Schedule  1.  Office  Equipment:     3  Desks  (§   $45,  8  chairs  (§   $9.50,  •_> 
Filing  Cases  (§  $75,  2  Typewriters  (§  $100,  1  Adding  Machine  $4]  1. 
Schedule  2.   Store  Fixtures:      5  Show  Cases  (g  ^17.">.  15  Chairs  (a   $10 
Schedule  3.  Delivery  Equipmenl  :     2  One-ton  trm-ks  @  $487.50. 

When  posting,  iten  i        instead  of  posting  the  total  amounts  in  the 

Ledger  accounts,  so  the  books  will  show  the  original  cost  of  each  article,  in  cs 

of  loss  ii\   tii e  or  "i herwise. 

July    -.  Paid  J.  C.  Adams  &  Co.  +12."). 80  for  blank  1 ks  and  office  stationery. 

Paid  Sinclair  Oil  Co.  $32.50  for  oil  and  gasoline  for  delivery  trucks. 
i  Debit  Administrative  Expense  $125.80,  and  Deliverj  Expense,  $32.50. 
on  the  credil  side  of  the  i  'ash  Book.) 
2.  Purchased  of  J.  H.  Mann  &  Co.,  Chicago  111.  Merchandise  as  per 
Invoice  No.  1.  3  10,  a  60,  $1,285.75.  Purchased  of  Royce  Bros.,  Kansas 
(  ity,   Mo.,   Merchandise  as  per  Invoice   No.  2,  3  15,  n  60,  $1,375 


BOOKKEEPING  AND  ACCOUNTING 


1G7 


The  following  are  the  sale  tickets  for  the  day : 

Charge  Tickets:  J.  E.  Perkins,  1  Suit,  $47.50.  S.  T.  Smith,  100  lbs. 
Nails  @  13c,  1  Cream  Separator,  $72.50.  O.  G.  Payton,  8  yds.  Printed 
Georgette  @  $3.50,  D.  L.  Jones,  9  yds.  Satin  @  $4.50. 

Cash  Tickets:  Cash,  2  pr.  Shoes  @  $5.25.  Cash,  1  Woman's  Suit. 
$7S.50.     Cash,  9  yds.  Satin  @  $4.50.     Cash,  3  pr.  Shoes  @  $5.25,  $15.75. 


H.  J,  BROWN  &  CO. 
CENERAt.   MERCHANDISE 

Chicago.  ^CC^y  J2j       192  ~ 

Name 

Address 

Dept.  ^7     Clerk    O     Ami.  Rec'd 


../..  Ji'' 


Charge  Ticket 


«#7 


o  a 


H.  J.  BROWN  &  CO. 

GENERAL    MERCHANDISE 

Chicago,    is  £-£-&/  -2,    192  ~ 


£^ 


Name 

Address 

Dept.  /3      Clerk  s5I    Ami.  Rec'd 


Charge  Ticket 


H,  J,  BROWN  &  CO. 

GENERAL    MERCHANDISE 
Chicago.     yotJZtf  2, 


s 


■-;•• 


Name  O.^^czy^m/ 


Address 


Pept.    (y     Clerk  */-     Amt.  Rec'd 


?,-3~a 


Charge  Ticket 


192  — 


a  ?  <?o 


H.  J.  BROWN  &  CO. 

GENERAL    MERCHANDISE 

■  2>     -192- 


Chicago, 


^ 


Name 
Address 


'an*^ 


Dept  <=&     Clerk   y     Ami.  Rec'd 

f'*^&fd(Z&K/.„. 4,4-J 


Charge  Ticket 


¥*■ 


<$-<? 


ILLUSTRATION    NO.    75.      CHARGE    TICKETS 


The  total  of  the  charge  tickets  is  $201.50.  The  following  en1  ry  is  recorded  in 
the  Journal,  and  both  items  are  cheeked  to  show  they  are  not  to  be  posted.  Only 
the  totals  of  the  special  columns  are  posted  at  the  end  of  the  month.  See 
illustration  of  the  Journal. 


Accounts  Receivable $201.50 

Sales    $201.50 

Then  the  amount  of  each  of  these  charge  tickets  is  posted  from  the  ticket 
direct  to  the  customer's  account  in  the  Sales  Ledger,  and  the  above  entry  is 
posted  to  the  General  Ledger,  from  the  Journal  in  the  footings  at  the  end  of' the 

month. 


1G8 


BOOKKEEPING  AND  ACCOUNTING 


The  following  arc  the  Cash  Tickets,  the  total  of  which  is  entered  in  the 

'  ash  Book. 


H.  J.  BROWN  &  CO. 

GENERAL    MERCHANDISE 

Chicago,  -   -Z      192- 


Name 

Address 

Dept.  <%/    Clerk    */-     Ami.  Rec'd       #/■*- 


^/US^PAaJu/  4.2  S 


Cash  Ticket 


/<?  -j-0 


</ 


<S~0 


H.  J.  BROWN  &  CO. 
GENERAL   MERCHANDISE 

Chicago,    i/cts&s    -2       192 — 

= 


Name 

Address 

Dept.   &     Clerk    &     AmtRec'd 


Cash  Ticket 


7* 


/ 


•SV.. 


s-<? 


H.  J.  BROWN  &   CO. 
GENERAL    MERCHANDISE 


Chicago, 


'/  ' 


, 


192 


Name 
Address 

Dept.J&.     Clerk    <?       Ami.  Reed  $VS~ 
4*^ '^f&t<yri/     4-<5~0     ■*/#. 


ft* 


<T<7 


* 


S0 


Cash  Ticket  Cash  Ticket 

ILLUSTRATION    NO     JC.      CASH    CREDITS 


H.  J.  BROWN  &  CO. 
GENERAL    MERCHANDISE 


t^S 


Chicago.     V  /  ■'  '  ' 


192 


Name 

Address 

Depl. 


Clerk  AmtRec'd   &J30  \ 


y^y. 


3^3sr-->J!JL^CJ.      ^;.' 


ft 


2£L 


The  total  of  the  Cash  Tickets  is  $145.25.  Enter  on  the  debit  side  of  the  Cash  Book, 
"Salt's,  Sundry  Ca  h  Sales,  $145.25"  in  the  Sales  column,  and  check  in  the  I..  F.  column. 

Pile  the  Charge  Tii  1  fastened  together)  .-ill  undet  the  date  of  July  2.  File  the 
Cash  Tickets  all  together  under  the  date  of  July  2,  in  a  separate  rile.  They  are  kepi  for 
ready  reference  in  case  any  question  comes  op.  The  department  and  clerk  huiu1.it  arc 
marked  on  these  tickets  to  Bhow  the  record,  but  we  are  not  keeping  books  for  each  depart- 
ment in  this  Bet,  so  ignore  that  marking.  It  is  only  to  show  how  they  arc  made  out  whore 
there  arc  departments. 

In  a  department  store,  the  tickets  for  each  department  would  be  kept  on  a  separate 
hook,  and  the  entry  in  the  Cash  Book  would  be,  "Sales  Dept.  A,"  "Sales  Dept.  B,"  and 

,  Eoi   each  department,  instead  of  entering  the  total  Sales  as  we  are  doing  in  this    et 

The  method  and  principle  would  be  the 

No  name  is  written  on  the  Cash  Tickets  because  accounts  are  not  kept  with  those  who 
pay  cash.  In  the  first  Cash  Ticket,  the  customer  gave  the  clerk  $15  to  pay  the  $10.50. 
Note  the  amount  received  is  entered  on  the  ticket,  the  difference  is  the  amount  of  change 
retui  ned  1 0  t  he  cust  oi 

July  2.  Set  up  a  Petty  <  lash  account  for  $75  for  the  petty  cash  fund  in  the  cash 
drawer  to  pay  petty  expenses.  (Debil  Petty  Cash  on  the  credil  side  of 
the  Cash  Book.    See  Petty  Cash  Boob  Illustration  No.  61a,  Chapter  VJ.l 

3.  Paid  for  Postage  $10.50,  Messenger  $1.25,  Rubber  Bands  $1.35;  paid 
express  on  advertising  matter  $3.25,  from  petty  cash  fund.  (Enter 
in  Petty  Cash  Booh 

::.  Paid  C.  &  B.  I.  R.  R.  Co.  $125  for  freighl  on  goods  purchased.  Paid 
J.  11.  Logan  $75.85  for  repairs  on  building.  (Debil  Freighl  In  and 
Building   Expense  and  Income  on  the  credil  side  of  the  Cash  Book.) 


BOOKKEEPING  AND  A< "VorXTING 


160 


Julv 


3.  The  following  are  the  Sale  Tickets  for  the  day: 

Charge  Tickets:  K.  G.  Martin.  504  Ash  St.,  3  bu.  Early  Potatoes 
@  $1.85,  100  lbs.  G.  Flour,  $5.75;  L.  1).  .Miller.  985  Rush  St.,  2  pr. 
Shoes  (5  $6.50,  1  Suit,  $47.50;  II.  P.  -lours.  1275  Main  St..  LOO  lbs. 
Nails  @  13c,  1  Set  Garden  Tools,  $6.75;  J.  L.  Peters,  1912  Morgan 
St..  5  gal.  Peaches  @  $1.35.  1  Hat,  $4.75. 

Cash  Tickets:  Cash,  1  Grind  Stone,  $11.75,  1  Saw,  $3.50.  Cash. 
Marmalade,  $2.25,  2  gal.  Peaches  @  $1.25.  Cash,  5  yds.  Satin  @ 
$4.50,  8  yds.  Ribbon  @  80c.     Cash,  1  Washing  Machine," $05. 

The  student  may  prepare  tickets  for  the  above,  or  make  the  entries  as  on 
July   2,  preceding,  without   the   tickets. 

3.  The  following  are  the  Credit  Tickets  for  the  day : 

Credit  Tickets:  J.  E.  Perkins,  allowance,  $1.85.  L.  D.  Miller, 
returned  1  pr.  Shoes,  $6.50.  R.  G.  Martin,  allowance,  $1.75.  D.  L. 
Jones,  allowance,  $1.50. 

A  credit  ticket  is  made  for  each  allowance  to  a  customer  for  overcharge 
or  error  in  the  price  or  for  any  defect  in  an  article,  and  for  any  goods  returned. 
In  case  any  goods  are  exchanged  for  something  else  of  different  value,  make  out 
two  tickets.  One  Credit  Ticket  for  the  article  returned  and  one  Charge  Ticket 
for  the  article  given  in  exchange  the  same  as  if  it  were  a  sale,  so  the  credit  and 
the  charge  will  appear  on  the  customer's  account. 


H.  J.  BROWN  &  CO. 

GENERAL  MERCHANDISE 


Chicago. 


£^± 


^ 


3 


192- 


Name     J/&C?t^&^Z4S  . 


Address 


Dept.  (2/  Clerk    ^S  Ami.  Reed 

<Z£&?-c*+^Zvi^c/ 


Credit  Ticket 


/ 


& 


H.  J.  BROWN  &  CO. 

GENERAL  MERCHANDISE 


Chicago,    J^/<^£y  ,3  .192  — 


Name*(l3.??zM^- 


Address 


Dept. 


Clerk 


Ami.  Rec'd 


jZ^eXusl'rz^cTC/. 


... / 


Credit  Ticket 


£  *SjSL. 


H.  J.  BROWN  &  CO. 
GENERAL  MERCHANDISE 


Chicago. 


^£y   k? 


Name 


Address 


*P7Z*ZszZ<^?/ 


Dept.  C/      Clerk  <5~~  Ami.  Rec'd 

dZ&#<<szz^z^c&/. _.. 


Credit  Ticket 


192- 


/ 


S~ 


H.  J.  BROWN  &  CO. 

GENERAL  MERCHANDISE 
Chicago.  ^f^-C^</  Jk. 


192- 


Name  <=*U  J^QcrTZjZd' 

Address 

Dept.  &    Clerk    */-  Ami.  Rec'd 

rCL^£o^^-ayyz^cjz/ 


Credit  Ticket 


/  <Sjff_ 


ILLUSTRATION    N'O. 


CREDIT   TICKETS 


The  total  of  the  Credit  Tickets  is  $11.00.     Enter  in  the  Journal  as  follows: 
Sales    $11.60 

Accounts  Receivable   $11.60 

and  post  each  of  these  tickets,  directly  from  the  ticket  to  the  eredit  of  the 
customer's  account  in  the  Sales  Ledger.  The  above  entry  is  posted  to  the  Gen- 
eral Ledger. 


170 


BOOKKEEPING   AND  ACCOUNTING 


•July    ■'!.   Received  cash  for  the  following  paj  meats  on  accounl  : 

Collection  Tickets:     .1.  E.  Perkins,  $25.     L.  D.  Miller,  $35.     S.  T. 
Smith,  $50.     D.  L.  Jones,  -l  i 


H.  J.  brown  &  CO. 

GENERAL   HEROHANDI3E 

Chicago,      '/'('V  y?     192- 


Same       (/£&?:       - 

Address 

Dept.  6.      Clerk  Aml.Rec'd 


Collection  Ticket 


! 


H.  J.  BROWN  &  CO. 
GENERAL   MERCHANDISE 

Chicago,  ^yic^f  *Js     192- 

Name^CdPPZ^^i^: , 

Address 


Dept. 


Clerk 


Ami.  Rec'd 


OL??/  *Z^esC~C-<^r~~/^~ 


Collection  Ticket 


vj-jri 


■ 


H.  J.  BROWN  &  00. 

GENERAL    MERCHANDISE 

Chicago,    J^c<:>  '/  ^S,    192 


— /- 


Name  ^J^^J^r, 

Address 

Dept.  Clerk 


Ami.  Rec'd 


Collection  Ticket 


\527  <7^ 


H.  J.  BROWN  &  CO. 

GENERAL   MERCHANDISE 

Chicago,      -  r  -192- 


Name 
Address 

Dept. 


~&-g?< 


>cm. 


Clerk 


Ami.  Reed 


Collection  Ticket 


ys\cc 


ILLUSTRATION    NO.    78.      COLI.Ei'TION    TICKETS 


The  total  of  those  collection  tickets  is  $125.     Enter  in  the  < ash  Book.    Credit  Accounts 
Receivable  on  the  debit  side  of  the  Cash  Book,  and  place  the  amount  in  Accounts  Receivi 
column.     Post  thi  amount  of  each  ticket  to  the  Credit  of  the  custon  -  i  -  account,  .'11111  file  all 
the  Collection  Tickets  togethei  under  date  of  July  3. 

In  older  tn  gel  the  idea,  the  studenl  may  make  the  tickets,  and  after  ma 
the  entries  as  instructed,  file  each  bunch  of  tickets  in  an  envelope  with  the 
proper  date  and  the  kind  of  tickets  written  <m  each  envelope. 

Note:  If  preferred,  the  names  of  the  customers  may  be  written  in  the  I 
Book  instead  of  Accounts  Receivable.  J.  E.  Perkins  on  account,  $25,  I>.  D. 
Miller,  cm  account,  $35,  and  so  on,  placing  each  amounl  in  the  Accounts  Receiv- 
able column.  Then  the  amounts  would  be  posted  to  the  customer's  accounl  from 
the  Cash  Book  instead  of  from  the  tickets.  'This  mighl  be  preferred  as  a  matter 
of  reference,  but  it  makes  more  writing,  and  the  filed  collection  tickets  are  a 
sufficient  reference. 

July  I.  Gave  J.  II.  Mann  &  Co  a  15  day  trade  acceptance,  dated  July  2,  for 
^1  .L' 47.1  s  ami  received  :!' ,  discount  on  Invoice  No.  1.  which  is  pay- 
ment in  full. 
1  Returned  goods  to  Royce  Bros,  to  the  value  of  $127.85  for  credit. 
Received  $11.25  from  J.  C.  Adams  Stationery  Co.  as  refund  on  bill 
for  office  supple  is 


BOOKKEEPING  AND  ACCOUNTING  171 

4.  The  following  are  the  tickets  for  the  day: 

Charge  Tickets:  J.  M.  Zion,  612  Elm  St.,  1  Tie,  $1.75,  1  Hat, 
$4.50,  1  pr.  Shoes.  $7.50.  W:  R.  Dawes,  727  Grove  St..  !)  yds.  Satin  @ 
$4.50,  8  yds.  Taffeta  @  $3.24.  J.  E.  Perkins,  1  Cream  Separator, 
$95.  S.  T.  Smith,  1  Suit,  $62.50,  1  Hat,  $5.25.  J.  M.  Leverich,  5112 
Washington  Ave.,  1  Woman's  Suit,  $82.50,  1   Summer  Dress,  $16.75. 

Cash  Tickets:  Cash,  3  pr.  Shoes  @  $4.50.  Cash,  2  Suits  @  $43.75. 
Cash,  10  yds.  Satin  @  $3.75.  Cash,  9  yds.  Printed  Georgette  @  $3.25. 
Cash,  1  Oil  Stove,  $13.75.     Cash,  1  Carpet  Sweeper,  $27.50. 

Credit  Tickets:  O.  G.  Payton,  allowance,  $2.25.  II.  P.  Jones, 
allowance.  $2.75.     D.  L.  Jones,  allowance,  $6.50. 

Collection  Tickets:  Received  on  account  from  J.  E.  Perkins, 
$27.50,  L.  D.  Miller,  $15,  S.  T.  Smith.  $20,  II.  P.  Jones,  $10.00. 

Find  the  total  of  each  kind  of  tickets  and  enter  that  of  the  Charge  Tickets 
and  Credit  Tickets  in  the  Journal  and  that  of  the  Cash  Tickets  and  Collection 
Tickets  in  the  Cash  Book,  as  shown  in  the  preceding  transactions. 

5.  Paid  for  Postage,  $13.00,  Light  Bill,  $2.75,  Statement  Blanks  for  office, 
$5.75.  Paid  extra  delivery  help,  $5.25,  gasoline,  $12.50.  Paid  for 
"ad"  in  newspaper,  $8.75.     All  paid  from  petty  cash  fund. 

5.  Paid  Delway  Repair  Co.  $79.95  for  overhauling  one  truck. 

5.  The  following  are  the  tickets  for  the  day : 

Charge  Tickets:  II.  P.  Jones,  2  pr.  Cloves  @  $3.25,  1  Hat,  $5.25, 
1  Suit,  $45.00.  J.  M.  Zion,  2  bu.  E.  Potatoes  @  $4.25,  50  lbs.  G.  Flour, 
$2.50,  1  bx.  Ivory  Soap,  $1.75.  J.  L.  Peters,  15  yds.  Percale  @  60c, 
12  yd.  Satin  @  $4.50,  10  yds.  Ribbon  @  35c.  G.  H.  Wilson,  1412  Main 
St.,  13  yd.  Scrim  @  50c,  25  yd.  Gingham  @  $1.25,  25  yd.  Sheeting  @ 
90c.  J.  M.  Leverich,  916  Arsenal  St.,  6  Shirts  @  $3.25,  1  Tie,  $2.25, 
1  doz.  Collars,  $1.80.  S.  T.  Smith,  25  lbs.  G.  Sugar  @  10c,  1  Woman's 
Suit,  $75,  45  yds.  Muslin  @  45c. 

Cash  Tickets:  Cash,  100  ft.  Garden  Hose  @  18c,  1  Oil  Stove, 
$12.50.  100  lbs.  Nails  @  15c.  Cash,  1  Set  Garden  fools,  $5.64,  1  Razor, 
$3.25.  1  Set  Silver.  $12.50.  Cash,  100  lbs.  F.  Flour,  $5.25,  2  bu.  Potatoes 
@  $4.75.  Cash,  12  cans  Corn  @  18c,  1  Washing  Machine,  $85.  Cash, 
1  Carpet  Sweeper,  $27.50.  Cash,  3  Shirt  Waists  @  $9.50,  1  Summer 
Dress,  $16.75. 

Collection  Tickets:  Received  payments  on  account  from  J.  M. 
Leverich  $50,  W.  R.  Dawes,  $35,  S.  T.  Smith  $25,  J.  E.  Perkins  $20. 
5.  Ptirchased  of  Headly  Grocer  Co.,  St.  Louis,  Mo.,  Merchandise  as  per 
Invoice  No.  3,  3/15,  n/60,  $1,428.35.  Purchased  of  R,  K.  Kelly  Co.. 
Detroit,  Mich.,  Invoice  No.  4.  3/15,  n/60,  $585.25.  Purchased  of  W. 
N.  Wilson  &  Co.,  Invoice  No.  5,  3/15,  n/60,  $478.25. 

5.  II.  J.  Brown  drew  $125  for  his  private  use,  and  J.  M.  Stone  drew  $85 
fur  his  private  use.     (Debit  each  partner's  Personal  Account.) 

6.  Paid  office  help  for  the  week  $127.50.  Paid  sales  force  for  the  week 
$135.40.     Paid  delivery  drivers  for  the  week  $37.50. 

6.  The  following  are  the  sale  tickets  for  the  day: 

Charge  Tickets:  E.  M.  Johnson.  1512  Maple  Ave..  1  Summer  Dress, 
$12.35,  24  yds.  Gingham  @  $1.25,  35  yds.  Muslin  @  45c,  2  Shirt  Waists 
@  $9.50.  J.  M.  Leverich,  1  Suit,  $50,  1  Hat,  $3.75,  1  pr.  Gloves,  $3.50. 
1  pr.  Shoes,  $9.50.  W.  R.  Dawes,  1  Cream  Separator.  $67.50.  1  Wash- 
in-  Machine,  $43.50.  1  Silver  Set,  $22.50.     L.  D.  Miller,  1   Suit.  $27.50, 


172  BOOKKEEPING  AND  ACCOUNTING 

2l,u,  Potai 3  $4.75,  100  lbs.  G.  Flour,  $6.25.     R.  G.  Martin.  12  yds. 

Satin  n,  $3.75,  25  yds  Percale  (5  60c,  12  yds.  Taffeta  (g  $3.30.     W.  I! 

Holmes,  71)  Olive  St..   l   Razor,  $3.25,  1  Sel   Garden  Tools,  $5.75,  1 

Grind  Stone,  $6.75,  1  <  Iream  Separator,  $75,  1  Washing  Machine,  $99.40. 
Cash  Tickets:     Cash,  1  Oil  Stove,  $12.50,  1  Se1  Silver,  $13  75,  2  Tea 

Kettles  (g  $2.85.     Cash,  2  bu.  Potatoes  (§  $4.75,  3  gal.  Peaches  (5  $1.25, 

12  can-;  Tomatoes  (§    15c.     Cash,  2  pr.  Gloves  (a   $3.25,  1  Tie,  .+2.2.".. 

1  s,ut.  $47.50,  1  pr.  Shoes,  $7.50.     Cash,   L5  yds.  Ta  -     i0,  9 

yds.  Printed  Georgette  (g   $3.50.     Cash,  1  bu.  Potatoes,  $5.25,  3  pkgs. 

Ralston  (g   25c,  100  lbs.  F.  Flour  $6.25.     ('ash.  1  pr.  Shoes,  $7.50,  4.". 

yds.  .Muslin  (a  45c,  9  yds.  Printed  Georgette  (g  $3.50. 
6.  Received  a  credit  memorandum  for  $112. .'!.">  from  ETeadly  Grocer  Co., 

allowance  for  damaged  goods  on  Invoice  No.  3. 
S.  Gave  a  cash  refund  for  goods  returned  thai  were  purchased  for  cash. 

$12.30. 
8.  The  statemenl  of  petty  '-ash  expenses  is  as  follow  - :     1  >elivery  Expense, 

$17.75,  Administrative  Expense  $34.60,  Selling  Expense  $12.00.     (Give 

a  check  payable  to  cash  for  the  total  of  these  expenses,  to  restore  the 

petty  cash  fund,  and  debil  each  expense  account  on  the  credit  side  of 

the  Cash  Book.)     Balance  the  Petty  ('ash  Book. 

8.  The  following  are  the  tickets  for  the  daj  : 

Charge  Tickets:  O.  <"!.  Payton,  43  yds.  Scrim  @  50c,  35  yds. 
Muslin  (a  45c.  15  yds.  Printed  Georgette  @  $3.50,  I).  L.  Jones.  1 
Woman's  Suit.  $78.50,  3  Shirt  Waists  «,  $9.75,  1  Sweater  Coat.  $26.50 
R.  G.  .Martin.  1  Cream  Separator,  $57.50,  1  Set  Silver,  $28.50,  100  ft. 
Garden  Hose  (a  18*/>c.  L.  I).  Miller.  2  pr.  Cloves  u,  $3.75,  1  Shirts 
@  $2.75,  1  Suit.  $47.50.  E.  L.  Pearson,  HI.".  Market  St..  2  bu.  Potatoes 
@  $4.75,  100  lbs.  G.  Plour,  $6.25,  1  doz.  Family  Soap  u,  15c.  B. 
Mitchell,  71S  Chestnut  St..  1  Carpel  Sweeper.  $27.50,  1  Grind  Stone. 
$6.75,  1  Set  Garden  Tools.  $5.75.  E.  .1.  Roberts,  2514  Ash  St..  1  doz. 
Collars.  $1.75,  (i  Shirts  @  $3.25,  1  Hat,  $1.7:,.  1  Suit.  $62.50.  II.  -I. 
Brown  took-  from  the  store  for  private  use.  1  Suit.  $57.50,  1  pr.  Gloves 
$3.75,  1  pr.  Shoes,  $8.50. 

Cash  Tickets:  Cash.  1  Woman's  Suit.  $54.50,  1  Sweater  Coat.  $30, 
1  pr.  (doves.  $4.50.  Cash,  12  yds.  Printed  Georgette  (g  $3.50,  25  yds. 
Gingham  (a  $1.25.  Cash,  3  Shirts  (a  $2.7-">.  1  pr.  Shoes.  $7.50,  1  do/. 
Collars.  $1.75,  1  Tie,  $1.7.",.  Cash.  50  lbs.  G.  Flour,  $2.50,  6  cans  Toma- 
toes (g  15c,  2  bu.  Potatoes  (g  - 1  7.",.  ('ash.  12  yds.  Taffeta  (5  $3.30,  12 
yds.  Ribbon  (g  35c,  25yds.  Muslin  0,  45c.  Cash.  1  oil  Stove,  $7.75,  100 
lbs.  Nails  («  15c,  1  Washing  Machine,  $42.50. 

Collection  Tickets:  Received  pavments  on  account  from:  -1.  E 
Perkins  $25,  O.  G.  Payton  $30,  R.  G.  Martin  $15, L.  D.  Miller  $2.",.  W.  R. 
Dawes  $2.">.  E.  M.  Johnson  $35. 

8.  Purchased  of  Bartletl  Bros.,  Peoria,  Ilk.  Invoice  No.  6,  3  1">.  n  60, 
$486.25.  Purchased  of  S.  G.  Crane  <v.  Co.,  Akron.  Ohio,  Invoice  No  7. 
:;  15,  n  i;ii.  $2,387.90.  Purchased  of  Johns  ,v.  Martin.  Cleveland,  Ohio. 
[nvoice  No.  B,  3  15,  n  60,  *17S.65. 

9  Returned  goods  to  Headly  Grocer  I  !o.  of  I  he  value  of  $63.25  for  credit. 
Gave  Rush  Printing  Co.  a  check  for  $S7.H5  for  printing  advertising 
booklets. 

9.  Paid  for  order  hook  for  sales  clerks.  $12.60,  Wrapping  Taper.  $6.50; 
paid  lor  Carbon  Paper.  $2.2-">.  Postage,  $10.25,  Phone  Pill.  $5.00,  from 
the  petty  cash   fund. 


BOOKKEEPING  ANT)  ACCOUNTING  173 

9.  Paid  Headly  Grocer  Co.  $1,215.17  in  lull  for  balance  of  Invoice  No.  3, 
$1,252.75,  deducting  3 %   discount. 

0.  The  following  are  the  tickets  for  the  day: 

Charge  Tickets:  J.  E.  Perkins.  15  yds.  Ribbon  @  35c,  18  yds. 
Gingham  @  $1.25,  12  yds.  Printed  Georgette  @  $3.50.  S.  T.  Smith, 
1  Sweater  Coat,  $27.50,  3  Shirt  Waists  @  $8.75, 1  Summer  Dress,  $16.75. 
II.  P.  Jones,  3  bu.  Potatoes  (§  $4.75,  100  lbs.  G.  Flour,  $6.25,  25  lbs. 
Sugar  @  15c.  J.  L.  Peters,  1  Hat,  $3.75,  1  Suit,  $62.50,  1  pr.  Shoes, 
$8.75.  J.  M.  Zion,  1  doz.  Collars.  $1.75,  6  Shirts  @  $2.75,  2  pr.  Shoes 
at  $6.25. 

Credit  Tickets:  W.  II.  Holmes  returned  Razor,  $3.25.  E.  L.  Pear- 
son for  overcharge,  $1.25.  B.  Mitchel  returned  Garden  Rake,  $1.75. 
E.  J.  Roberts  for  error  on  ticket,  $1.10. 

Cash  Tickets:  Cash.  1  Carpet  Sweeper,  $22,50.  Cash,  100  ft. 
Garden  Hose  (<<•  18'..e.  Cash,  Kid  lbs.  V.  Flour,  $6.25,  3  gal.  Peaches 
@  $1.25.  Cash,  1  "Woman  's  Suit.  $76.00.  Cash,  12  yds.  Satin  @  $3.75. 
Cash,  16  yds.  Printed  Georgette  @  $3.65.  Cash,  2  pr.  Gloves  @  $4.25, 
1  Suit,  $47.50.     Cash,  3  pr.  Shoes  @  $5.25. 

Collection  Tickets:  Received  payments  on  account  as  follows: 
G.  II.  Wilson  $15,  E.  M.  Johnson  $2*7.50,  J.  M.  Leverich  $15,  J.  M. 
Zion  $20,  J.  L.  Peters  $15. 
10.  Borrowed  $5,000  at  Central  National  Bank  on  our  15  day  note  at  6%. 
(Credit  Notes  Payable,  $5,000  on  the  debit  side  of  the  Cash  Book,  and 
debit  Interest  and  Discount  $12,50  on  the  Credit  side  of  the  Cash 
Book.) 
10.  Paid  for  oil,  $3.50,  gasoline  for  delivery  trucks,  $5.75.  Paid  for 
postage  and  office  supplies,  $13.50.  Paid  parcel  post,  $5.00,  and  pre- 
paid express,  $6.50,  on  goods  shipped.     All  from  petty  cash. 

10.  The  following  are  the  tickets  for  the  day  : 

Charge  Tickets :  D.  P.  Mason,  2412  Elm  St.,  12  yds.  Lace  @  30c, 
61  yds.  Ribbon  @  $1.25.  J.  M.  Bryant,  1618  Market  St.,  1  doz.  Hose, 
$7.50,  1  Suit,  $67.50.  R.  M.  Cruthers,  915  Cherry  St.,  2  bu.  Potatoes 
@  $4.75,  1  doz.  Ivory  Soap,  $1.25,  100  lbs.  G.  Flour,  $6.25.  W.  R. 
Dawes,  12  yds.  Taffeta  @  $3.30, 18  yds.  Percale  @  65c.  J.  M.  Leverich, 
1  Misses'  Suit  $62.50,  20  yds.  Scrim  @  55c. 

Cash  Tickets:  Cash,  1  Razor,  $3.75.  1  Set  Silver,  $13.50.  Cash, 
100  lbs.  Flour,  $6.25.  25  lbs.  Sugar  @  16c.  Cash,  1  Sweater  Coat, 
$27.50,  1  Summer  Dress,  $16.75.  Cash,  25  yds.  Gingham  @  $1.25, 
15  yds.  Printed  Georgette  @  $3.50.     Cash,  13  yds.  Taffeta  @  $3.30. 

11.  Collection  Tickets:  Received  cash  for  the  following  payments  on 
account :  J.  E.  Perkins  $50,  O.  G.  Payton  $35,  D.  L.  Jones  $65,  R.  G. 
Martin  $85,  L.  D.  Miller  $50,  II.  P.  Jones  $35. 

11.  Paid  Regan  Printing  Co.  $37.50  for  letterheads  and  envelopes  for  office 
use.  Paid  Santa  Fe  R.  R.  Co.  $48.75  for  freight  on  Invoice  from  Headly 
Grocer  Co. 

11.  The  following  are  the  sale  tickets  for  the  day: 

Charge  Tickets:  E.  M.  Johnson.  100  ft.  Garden  Hose  @  18V>c, 
1  Set  Silver  $12,50.  1  Razor,  $3.75.  G.  E.  Wilson,  1325  Oak  St.,  25  lbs. 
Sugar  @  17c,  100  lbs.  G.  Flour,  $6.25,  2  bu.  Potatoes  @  $4.75.  W.  II. 
Holmes,  12  yds.  Taffeta  @  $3.30,  35  yds.  Ribbon  @  65c,  1  Summer 
Dress.  $10.05. 


174  BOOKKEEPING  AND  ACCOUNTING 

Cash  Tickets:     Cash,  12  Lbs.  Oolong  Tea  (q   65c,  50  lbs.  M.  &  J. 
1  offee  <"  57c.     Cash,  2  bx.  Graham  Cra  -  I  25,  3  bx.  1).  Peaches 

(§  $4.35,  t  bx.  Silver  Prunes  (5  $5  15  Cash,  1  Suit,  $63.75,  1  Tie,  $2.50. 
( 'ash.  Il'  yds.  printed  Geo  •     - 

L2.   Returned  goods  to  R.  II.  Kelly  Co.  to  the  value  of  $32.50  for  credit. 

R ived  a  memorandum  of  credit  for  $34.50  From  W.  X.  Wilson  &  I 

for  overcharge.  Paid  Monon  R.  R.  Co.  $132.75  for  freighl  on  Invoices 
Nos.  5  and  6.  Received  $11.25  rebate  from  C.  M.  &  St.  P.  R.  R.  on 
freighl  bill  of  July  5  for  overcharge. 

12.  Paid  li.  II.  Kelly  Co.  $536.17  in  full  for  Invoice  No.  4.  deducting  ■'■  ■ 
discounl  en  balance  of  $552.75. 

12.  The  following  arc  the  sale  tickets  for  the  day: 

Charge  Tickets:     B.   L.   Pearson,  2  bx.  Chocolate  (g    $6.25,  3 
Raisins  (§   $4.85,  •'{  bx.  Graham  Crackers  (a   $:{.(>().     I!.  Mitchell,  :S  bx 
Silver  Prunes  (>i  $5.15,  1  Suit,  $43.50.     E.  .1.  Roberts,  1  Cream  Sepa 
rator,  $62.50,  3  pr.  Shoes  (<•  $5.25.    J.  M.  Stone  for  private  use.  3  cs. 
Tomatoes  (r,  $5.25,  25  lbs.  M.  &  J.  Coffee  @  58c. 

Cash  Tickets:     Cash,  3  bx.  Graham  Crackers  (3  $3.25,  2  bx.  Silver 

Prunes  (n  $5.15.  Cash.  1  set  Garden  Tools,  $6.75,  1  set  Silver.  .+  14.7."). 
1  Saw.  $3.50.  Cash.  35  yds.  .Muslin  («  4.V,  42  yds.  Ribbon  (n  95c, 
12  yds.  Satin  @  $3.85. 

13.  Paid  bookkeeper  and  office  help  for  the  week  $127.50.  Paid  sales 
clerks  and  window  trimmer  for  the  week.  $135.40.  Paid  delivery 
drivers  for  the  week.  $37.50. 

13.    Purchased   merchandise  as   follows:     Of   W.   D.  Sims  &   Co..   I'tiea.   N. 

V..  Invoice  No.  !»,  3  15,  o  60,  for  $539.25.    Of  J.  II.  Wiley  &  Co.,  York. 

l'a..  Invoice  No.  10,  3  15,  n  60,  for  $674.35.    Of  G.  II.  Ransom  &  Bro., 

Toledo,  O.,  Invoice  No.  11,3  I5,n  60,  for  $712.95. 
13.  Paid  W.  X.  Wilson  &  Co.  $430.19  in  full  for  Invoice  No.  5,  deducting 

'■*'  <   discount  on  balance  of  $443.50. 
li.'.  Collection  Tickets:     Received  cash  for  the  following  payments  on  ac 

count:    W.  II.  Holmes  $50,  B.  .Mitchell  $25,  E.  J.  Roberts  $50,  J.  M. 

Zion  $15,  W.  R.  Dawes  $85. 

13.  The  following  are  the  sale  tickets  for  the  day: 

Charge  Tickets:  R.  M.  Cruthers,  25  lbs  M  &  -l  Coffee  (g  58c,  2cs. 
Raisins  (§  $4.85,  1  pr.  shoe-.  $7.50.  J.  M.  Bryant,  1  Suil  $57.50,  12 
collars.  $1.75,  16  yds.  Taffeta  @  $3.30.  D.  P.  Mason.  2  bx.  Silver 
Prunes  (a  $5.15,  2  bx.  Chocolate  (a  $6.25,  6  Shirts  w  $2.75.  .1  E 
Perkins.  2  pr.  (doves  („  $3  75,  1  Sun.  $48.50,  1  Tie,  $2.25.  S.  T.  Smith, 
12  yds  Taffeta  (§  $3.30,  25  yds.  Gingham  (§  $1.25,  9  yds.  Satin  (§ 
$3.50.  O.  G.  Payton,  35  yds.  Muslin  (a  15c,  33  yds.  Sheeting  @  90c,  2 
pr.  shoes  <<i  $4.75. 

Cash  Tickets:  Cash.  3  bx.  I).  Peaches  @  $4.25,  12  lbs.  Oolonsi  Tea 
(5  65c.  Cash.  1  oil  Stove,  $13.25,  1  Razor,  > ::  l'."..  (ash.  1  Cream  Sep- 
arator $62.50.  ('ash.  25  yds.  Scrim  (a  55c,  13  yds.  Printed  Georgette 
@$3.50.  Cash.  1  Set  Garden  Tools, $6.75,  1  Sel  silver,  $14.75,  I  Sum- 
mer Dress,  $]  6.75. 
13.  The  statement  of  the  petty  cash  fund  for  the  week  is  as  follows:  De 
livery  Expense,  $9.25,  Administrative  Expense  .>!().  Selling  Expense 

$30.60.    Restore  the  cash  and  balaj the  Petty  Cash  Book. 

13.  Paid  Bartletl  Pros.  $471.66  in  full  for  Invoice  No.  6,  deducting  ■':•. 

discount. 


BOOKKEEPING  AND  ACCOUNTING  175 

13.  Ascertain  the  cash  balance  and  post  the  books  to  date.  Be  careful  to 
enter  the  terms  of  each  credit  in  the  explanation  column  of  the  ledger 
account  when  posting  from  the  Purchases  Honk  (3  15,  a  60)  so  as 
to  keep  close  watch  on  the  discount  period,  in  making  payments  in 
time  to  secure  the  discount. 

15.  Received  cash  for  the  following  payments  on  account: 

Collection  Tickets:  D.  P.  Mason  $60,  -T.  M.  Bryant  $75.  J.  E.  Per- 
kins $45,  S.  T.  Smith  $35,  0.  G.  Payton  $60,  D.  L.  Jones  $25,  R.  G. 
.Martin  $55. 

15.  The  following  are  the  tickets  for  the  day : 

Charge  Tickets:  D.  L.  Jones,  2  cs.  Ideal  Tomatoes  @  $6.25,  20 
lbs.  M  &  J  Coffee  @  58c,  2  cs.  Raisins  @  $4.85.  R.  G.  Martin,  9  yds. 
Satin  @  $3.50,  25  yds.  Muslin  @  45c.  L.  D.  Miller,  3  Shirt  Waists  @ 
$9.75.  1  Sweater  Coat  @  $27.50.  IT.  P.  Jones,  1  Cream  Separator, 
$72.50. 

Cash  Tickets:  1  pr.  Gloves,  $3.75,  1  Hat  $5.25,  Cash,  1  Suit  $42.50, 
1  pr.  Shoes,  $8.50.  Cash,  1  Carpet  Sweeper,  $14.25,  1  Set  Silver,  $12.25, 
Cash,  1  Woman's  Suit,  $73.50.  Cash,  35  yds.  Scrim  @  65c,  12  yds.  Taf- 
feta @  $3.30.    Cash,  1  Suit,  $67.50. 

16.  Gave  S.  G.  Crane  &  Co.  a  30  day  note  at  6%  for  $2,387.90  on  account. 
Gave  J.  II.  "Wiley  &  Co.  a  30  day  note  at  6%  for  $1,674.35  on  account. 

16.  Collection  Tickets:  Received  cash  for  the  following  payments  on  ac- 
count :  J.  M.  Bryant  $35,  J.  M.  Leverich  $65,  G.  II.  Wilson  $25,  W.  II. 
Holmes  $65. 

16.  .Paid  for  twine,  $3.85,  extra  wages  for  delivery,  $4.75;  parcel  post, 
$7.50.  Paid  for  cleaning  windows.  $5.60,  office  supplies,  $8.95,  from 
petty  cash  fund. 

16.  The  following  are  the  tickets  for  the  day : 

Charge  Tickets:  J.  L.  Peters.  1  Suit.  $42.50,  1  pr.  Shoes  $5.75.  J. 
M.  Zion,  10  lbs.  Oolong  Tea  @  6Sc,  2  bx.  D.  Peaches  $4.35.  12  lbs.  M 
&  J  Coffee  @  65c.  W.  R.  Dawes,  1  Carpet  Sweeper,  $18.75,  1  Wash- 
ing Machine,  $67.50,  100  lbs.  Nails  @  15c.  J.  M.  Leverich,  15  yds. 
Printed  Georgette  @  $3.50,  45  yds.  Gingham  @  $1.25.  E.  M.  John- 
son, 1  Misses'  Suit  $68.75,  1  Sweater  Coat,  $27.50,  3  Shirt  Waists  (a) 
$11.25.  G.  II.  Wilson.  13  yds.  Taffeta  @  $3.30,  17  yds.  Ribbon  @  45c, 
45  3"ds.  Muslin  @  45c. 

Cash  Tickets:  Cash,  3  bx.  Graham  Crackers  @  $3.25,  3  cs.  Lima 
Beans  ©  $3.60.  Cash.  1  Suit.  $48.75,  1  Hat  $5.50.  Cash,  15  yds.  Satin 
@  $3.50,  3  pr.  Gloves  @  $3.75.  Cash,  1  Ra"zor.  $3.25,  1  Set  Silver. 
$14.50.    Cash,  3  bx.  Chocolate  @  $6.25,  2  cs.  Raisins  @  $4.85. 

17.  Paid  B.  &  O.  R.  R.  Co.  $126.54  for  freight  on  goods  purchased. 

17.  Purchased  merchandise  of  J.  M.  Smyth  Co.,  Boston,  Mass.,  Invoice  No. 
12,  3  15,  n  GO,  $895.60;  of  Central' Grocer  Co.,  Invoice  No.  13.  3/15 
n/60,  $1,185.90;  of  Eastern  Grocer  Co..  York,  Pa.  Invoice  No.  14. 
3/15,  n'60,  $1,295.85;  of  J.  II.  Mann  &  Co.,  Invoice  No.  15,  3/15,  n/60, 
$723.50;  of  Royce  Bros.  Invoice  No.  16,  3/15,  n/60,  $1,132.75. 

17.  Collection  Tickets:  Received  cash  for  the  following  payments  on  ac- 
count: R.  M.  Cruthers  $25,  E.  L.  Pearson  $25.  E.  M.  Johnson  $50,  J. 
L.  Peters  $25,  L.  D.  Miller  $25. 


176  BOOKKEEPING  AND  ACCOUNTING 

17.  The  following  are  the  tickets  for  the  day: 

Charge  Tickets:  W.  II.  Bolmes,  23  yds.  Satin  (g  $3.50,  55  yds.  Rib- 
bon @  85c,  E.  L.  Pearson,  2  Women's  Suits  (g  $62.50,  5  Shirt  Waists 
@  $9.75  each,  B  Mitchell,  12  lbs.  M  &  -l  Coffee  <<>  58c,  3  bx.  Silver 
Prunes  ("  $5.15,  3  bx.  Chocolate  (g  $6.25,  E.  J.  Roberts,  1  Washing 
Machine  $67.50,  1  Sel  Garden  Tools  $6.75,  1  Oil  Stove,  $13:75,  D.  P. 
Mason,  5  bu.  Potatoes  (5  $4.75,  100  lbs.  G.  Flour,  $7.25,  10  bx.  D 
Peaches  (g  $4.35,  R.  M.  Cruthers,  2  Suits  (g  $47.50,  3  pr  Shoes  <§ 
$5.75,  6  Shirts  (5    $4.25. 

Credit  Tickets:     G.  II.  Wilson  returned  goods,  $3.25,  E.  M.  Johns  □ 
allowance  for  error,  $1.25,  J.  M.  Leverich  for  overcharge,  $1.75. 

Cash  Tickets:     Cash,   18  yds.   Printed  Georgette  I,  18  yds 

Taffeta  (g   $3.30,  Cash,  100  ft.  Garden  Hose  (§    18y2c,  1  Cream  Sep- 
arator, $77.50,  (ash.  2  Women's  Suits  (5   $67.50,  Cash,  7.".  yds   Sheei 
ing  ui  96c,  1  Suit,  $72.50.    Cash.  1  Washing  Machine,  $72.50,  1  Cream 
Separator,  $75. 

19.  Received  $13.75  from  Monon  R.  I>.  Co.  refund  on  freighl  bill  on  ac- 
ruiiiit  of  overweight.  Paid  J.  II.  Maun  &  Co  -i  147.18  for  our  ac 
ceptance  of  July  t. 

20.  Paid  office  help  for  the  week  $127.50.  Paid  sales  force,  $135.40.  Paid 
delivery  drivers  >f:i7..~>ii. 

I'd.  Received  a  credh  memorandum  from  W.  D.  Sims  &  Co.  for  $17.65  for 
overcharge  on  Invoice  No.  9.  Received  a  eredil  memorandum  for 
$24.85  from  J.  II.  Wiley  &  Co.  for  damaged  goods.  Returned  goods  to 
the  value  of  $29.75  to  G.  II.  Ransom  &  Bro.  for  credit. 

20.  The  following  are  the  tickets  for  the  day: 

Charge  Tickets:     J.  R.  Dolan,  1462  Morgan  St..  2  Suits  (5  $54.25, 

1  Woman's  Suit.  $87.50,  B.  W.  Thomas,  1912  Pine  St..  24  yds.  Satin 
@  $3.50,  12  yds.  Taffeta  u,  $3.30,  7:.  yds.  Sheeting  (g  95c.  J.  M 
Bryant,  3  women's  Suits  (5  $62.50,  Is  yds.  Printed  Georgette  (g  $3.30. 
J.  B.  Perkins,  1  Cream  Separator  $67.50,  1  Washing  Machine  $63.75 
S.  T.  Smith.  2  Su.ts  (a  $47.50,  2  Hats  ui  $5.25,  3  pr.  Sho  --  K 
O.  G.  Payton,  27  yds.  Satin  @  $3.50,  64  yds.  Muslin  (a  85c,  23  yds. 
Printed  Georgette  (a  $3.30. 

Cash  Tickets:    Cash,  2  Summer  Dresses  (g  $17.25,  2  Sweater  Coats 
@  $13.25.    Cash.  27  yds.  Taffeta  (g  $3.30,  ::_•  y.ls.  Satin  (a  >;.">"    Cash. 

2  Suits  (a  $47.50,  3  pr.  Shoes  (g  $7.25.  Cash.  12  Collars  $1.75,  3  pr. 
Gloves  (<>  $3.75.  Cash,  1  Cream  Separator,  $87.50.  Cash,  t  pr.  shoes 
@  $7.35.  Cash.  I  bx.  D.  Peaches  (5  $4.25,  1  Woman's  Suit.  $92.50. 
Cash.  6  shirts  („  $5.25,  1  Suit.  $62.40.  , 

22.  Paid  Murch  Bros.  $68.75  for  repairing  doors  and  windows  in  the 
store  building.  Paid  Johns  &  Martin  $464.29  in  full  for  Invoice  No. 
8,  deducting  3' .  discount. 

22.  The  statement  of  expenses  prepared  from  the  Petty  Cash  Booh  shows 
the  following  total  amounts  paid  ou1  :  Delivery  Expense,  $15.20, 
Administrative  Expense  $14.55,  Selling  Expense  $16.10. 

'2-.  Collection  Tickets:  Received  Cash  for  the  following  payments  on  ac- 
eount :  E.  W.  Thomas  $7."..  J.  R.  Dolan  $85,  R.  M.  Cruthers  $45,  J.  M. 
Bryant  $125,  D.  P.  Mason  $25. 

22.  The  following  are  the  sale  tickets  for  the  day  : 

Charge  Tickets :    R.  G.  Martin,  3  Suits  <§  $45,  3  Hats  (8  $4.75,  L   D 
Miller,  37  yds.  Satin  (g  $3.50,  \3  yds.  Printed  Georgette  (g  $3.50.    II. 


BOOKKEEPING  AND  ACCOUNTING  177 

P.  Jones,  10  lbs.  Oolong'  Tea  @  75c,  3  cs.  Tomatoes  @  $5.25,  1  Woman  "s 
Suit  $97.50.  J.  L.  Peters.  200  lbs.  F.  Flour  @  $7.25,  1  Washing  Ma- 
chine $87.50,  1  Cream  Separator,  $87.50.  W.  R.  Dawes,  3  Suits  @ 
$67.50,  3  pr.  Gloves  @  $5.25,  3  Hats  @  $4.85. 

Cash  Tickets:  Cash.  1  woman's  Suit  $112.50,  Cash,  6  Shirt  Waists  @ 
$13.50  each.  Cash,  1  Washing  Machine  $72.50.  Cash,  1  Cream  Sep- 
ator  $77.50.  Cash,  1  Carpet  Sweeper.  $17.50.  Cash,  43  yds. 
Georgette  @  $3.50,  32  yds.  Satin  @  $3.50.  Cash,  3  Suits  @  $67.50. 
Cash,  2  Women's  Suits  @  $87.50.    Cash,  1  Woman's  Suit,  $97.50. 

22.  Post  the  books  to  date,  and  ascertain  the  Cash  Balance. 

23.  The  following  are  the  credit  tickets  for  the  day: 

Charge  Tickets:  J.  M.  Zion,  3  Saws  @  $3.50,  1  Washing  Machine, 
$62.50.  J.  M.  Leverich,  2  Suits  @  $42.50,  2  Hats  @  $5.25,  6  Shirts  @ 
$3.75.  E.  M.  Johnson,  25  lbs.  Sugar  @  19c,  100  lbs.  Flour,  $7.25,  3 
bu.  Potatoes  @  $5.25.  G.  H.  Wilson,  2  Women's  Suits  @  $77.50,  6 
Shirt  Waits  @  $9.75. 

Credit  Tickets:  J.  E.  Perkins  overcharge  $3.25,  S.  T.  Smith  goods 
returned  $2.85.  O.  G.  Payton,  error  on  bill  $1.35,  D.  L.  Jones  defective 
goods  $2.25,  R.  G.  Martin  returned  goods,  $3.25. 

Cash  Tickets:  Cash,  32  vds.  Satin  @  $3.50,  54  yds.  Ribbon  @  75c. 
Cash,  3  Women's  Suits  $62.50,  42  yds.  Printed  Georgette  @  $3.50. 
Cash.  3  pr.  Gloves  @  $4.75;  3  Suits  @  $43.50.  Cash,  2  Women's  Suits 
@  $82.50.  Cash,  45  yds.  Taffeta  @  $3.30.  Cash,  3  Sweater  Coats  @ 
$27.50.  Cash,  1  Cream  Separator,  $87.50. 
23.  Paid  W.  D.  Sims  &  Co.  $505.95  in  full  for  Invoice  No.  9,  deducting  3% 
discount  on  the  balance  of  $521.60.  Paid  Markham  Insurance  Agency 
$270,  for  policy  on  stock  of  goods  to  cover  from  July  1,  one  year. 
23.  Purchased  merchandise  of  Headly  Grocer  Co.,  Invoice  No.  17,  3/15, 
n/60,  $657.95;  of  R.  K.  Kelly  Co.,  Invoice  No.  18.  3/15,  n/60,  $538.65,- 
of  W.  N.  Wilson  &  Co.  Invoice  No.  19,  3/15,  n/60,  $741.35;  of  Bartlett 
Bros..  Invoice  No.  20,  3/15,  n/60,  $528.45. 

23.  Received  $5.35  refund  from  Murch  Bros,  for  error  in  repair  bill  of 
July  21.  (Credit  Building  Expense  on  debit  side  of  the  Cash  Book.) 
Paid  for  Oil  $6.35,  gasoline  $9.85  for  delivery  trucks,  office  supplies 
$5.35,  postage  $6.75  for  office.  Prepaid  express.  $3.50,  parcel  post 
$4.50.  wrapping  paper  $11.25,  from  the  petty  cash  fund. 

24.  The  following  are  the  sale  and  credit  tickets  for  the  day. 

Charge  Tickets:  E.  W.  Thomas.  3  pr.  Gloves  @  $3.25,  3  Suits  @ 
$47.50.  J.  R.  Dolan,  36  yds.  Satin  @  $3.50,  63  yds.  Sheeting  @  85c,  54 
yds.  Muslin  @  45c.  R.  M.  Cruthers  5  bu.  Potatoes  @  $4.75;  3  cs. 
Tomatoes  @  $5.25,  3  bx.  Silver  Prunes  @  $5.15.  J.  M.  Bryant,  3  bx. 
Chocolate  @  $6.25,  2  Suits  (a>  $52.5(1,  4  pr.  Shoes  @  $5.75.  D.  P.  Ma- 
son. 1  Cream  Separator  $93.50,  3  Saws  @  $3.50,  2  pr.  Shoes  @  $4.75. 
II.  J.  Brown,  2  es.  Raisins  @  $4.85,  3  bx.  Silver  Prunes  @  $5.15,  for 
private  use. 

Credit  Tickets:  W.  II.  Holmes,  returned  goods  $2.75,  E.  L.  Pearson, 
error  on  bill  $1.25.  B.  Mitchell  overcharge  $2.35,  E.  J.  Roberts  dam- 
aged article.  $3.25. 

Cash  Tickets:  Cash.  52  vds.  Satin  (a>  $3.50;  Cash,  63  yds.  Printed 
Georgette  @  $3.50.  Cash.  2  Women's  Suits  @  $83.75.  Cash,  5  Shirt 
Waists  @  $13.25.  2  Summer  Dresses  @  $16.75.  Cash.  1  Carpet  Sweeper 
$23.75,  Cash.  1  Cream  Separator  $97.50.    Cash,  1  Woman 's  Suit,  $87.50. 


L78  BOOKKEEPING  AND  ACCOUNTING 

24.  Collection  Tickets:  Received  '-ash  for  the  following  payments  on  ac- 
count: E.  W.  Thomas  $125,  J.  R.  Dolan  $150,  R.  M.  Cruthers  $75,  D. 
P.  .Mas,, i,  $125;  W.  R.  Dawes  $175. 

24.  Received  a  credit  memorandum  for  118.65  from  Bartleti  Bros,  for 
damaged  goods.  Received  a  credil  memorandum  for  $28.75  from 
Johns  iv  Martin  for  overcharge.  Returned  goods  to  S.  G.  Crane  ^v 
i  !o.  in  i  he  value  of  $32.75  for  credit. 

l'4.  Purchased  merchandise  of  S.  G.  Crane  &  Co.    [nvoice  No.  21,  3  1">. 
ii  60,  $594.75;  of  Johns  &  .Martin,  [nvoice  No.  32,  3  15,  o  60,  $72  I  - 
of  W.  I).  Sim.  &  Co.     [nvoice  No.  23,  3  15,  o  60,  $632.95;  of  Eastern 
Grocer  Co.    [nvoice  No.  24,  3  15,  d  60,  $498.70. 

25.  The  following  are  the  sale  and  credil  tickets  for  the  day: 

Charge  Tickets:  W.  II  Holmes,  2  Women's  Suits  u,  $67.50,  62  yds. 
Satin  ui  $3.50.  E,  L.  Pearson,  54  yds.  Taffeta  (§  $3.30,  3  pr.  Gloves 
(a   $4.75,  12  yds.  Gingham  (§   $1.25.     B.  Mitchell,  3  Suits  (g   $47.50, 

3  Hats  ui  $5.25,  56  yds.  Printed  G -getti         •  1.50     B.  -I    Roberts,  1 

Cream  Separator  $77.50,  I  Washing  Machine  $85,  100  ft.  Garden  Hose 
@  ISUc.  J.  E.  Perkins  3  bu.  Potatoes  (§  $4.75,  15  lbs.  Sugar  (§  19c. 
5  cs   Tomatoes  (5  $5.25. 

Ciedit  Tickets:     J.   L,   Peters,  returned   goods  $3.45,  J.    M.  Zion, 

iit n  tickel  $2.15,  G.  W.  Wilson  allowance  $2.35,  J.  M.  Leverich, 

damaged  goods  $3.50. 

Cash  Tickets:    Cash,  63  yds.  Satin  (5  $3.50.    Cash.:;  W m's  Suits 

@  $86.75,  Cash,  75  yds.  Muslin  (§  45c,  Cash,  54  yds.  Printed  Georgette 
@.$3.50.  Cash.  [2  Collars.  $1.75,  2  Suits  @  $52.50.  ('ash.  1  Washing 
Machine  $72.50.  Cash.  1  Set  Silver,  $6.75.  Cash.  1  Oil  Stove  $16.75. 
Cash.  1  Cream  Separator  $77.50. 

'_!•">.  Gave  II.  J.  1! row  ii  $38.50  to  be  used  as  expenses  on  buying  trip.    I'aiil 
W.  P.  Dunn  vv.  Co.  for  printing  advertising  matter  $149.25.  (Cha 
to  selling  expense,  unless  an  accounl   is  being  kept   for  Buying  Ex- 
pense. I 

25.  Paid  Regan  Printing  Co.  $138.95  for  printing  letterheads  and  en- 
velopes for  general  office  use. 

25.  Paid  our  $5,000  note  at  the  Central  National  Bank  bj  giving  a  new- 
note  for  $4,500,  30  'lays  at  6%,  and  our  check  for  $522.50  for  the  dif- 
ference ineliidiiiL!  the  interest  on  the  new  note.  (Knter  in  the  .lournal 
and  check  the  cash  item  and  enter  the  cash  on  the  credil  side  of  the 
(ash  Book  and  check  it  there.) 

L'(i.  The  following  are  the  sale  and  credit  tickets  for  the  day: 

Charge  Tickets:  S.  T.  Smith  54  yds.  Taffeta  @  $3.30,  1  Suil  $55. 
().  G.  I'ayton,  1  Woman's  Suit.  $87.50,  5  Shirt  Waists  «,  $9.75.  i  >.  L 
Jones,  1  Oil  Stove  $14.75,  1  Cream  Separator  $72.50.  J.  1-'.  Monroe, 
615  South  St.,  65  yds.  Gingham  (§  $1.25,  56  yds.  Muslin  (5  60c.  J. 
II.  Hendricks.  1025  Stat.'  St..  5  bu.  Potatoes  (g  $4.75,  5cs.  Silver  Prunes 
(§  $5.15. 

Credit  Tickets:  B.  Mitchell  returned  goods,  $3.20,  I..  D.  Miller  over- 
charge, $1.75,  II.  1'.  do nes.  error  on  t ieket  $2.35.  W.  R.  Dawes  damaged 
article.  $3.75. 

Cash  Tickets:  3  bx.  Cheese,  60  lbs.  <§  18c  Cash.  20  lbs.  M  &  .1 
i  offee  ("  63c.  Cash  37  yds.  Satin  (5  $3.50.  Cash.  1  Woman's  Suit. 
$97.50.  Cash.  ■_'  hats  u,  $5.25.  Cash,  1  Suit  $47.50,  1  pr.  Gloves  $4.65. 
Cash,]  Washing  Machine  $72.50.  Cash,  5  bu.  Potatoes  (5  $4.75.  Cash, 
:;  pr.  Shoes  (q  J>6.25. 


BOOKKEEPING  AND  ACCOUNTING  179 

26.  Paid  City  Garage  Co.  for  garage  bill,  $75.  Paid  from  petty  cash  fund 
for  order  book  $4.50,  and  express  charges  $4.75  (Selling  Expense)  ; 
for  postage  $2.50.  and  post  cards  $1.75. 

26.  Paid  G.  H.  Kansom  &  Bro.  $662.70  in  full  for  invoice  of  July  13,  de- 
ducting 3%  discount  from  balance  of  $683.20. 

26.  Purchased  merchandise  of  J.  II.  Wiley  &  Co.  Invoice  No.  25,  3/15, 
n/60,  $389.35;  of  G.  II.  Ransom  &  Co.  Invoice  No.  26,  3/15,  n/60, 
$1,312.50. 

27.  Returned  goods  to  J.  M.  Smyth  &  Co.  value  $86.54  for  credit.  Re- 
ceived credit  memorandum  for  $58.35  from  Eastern  Grocer  Co.  for 
defective  goods  on  invoice  No.  14,  July  17. 

27.  The  following  are  the  sale  tickets  for  the  day: 

Charge  Tickets:  R.  G.  Martin,  46  yds.  Satin  @  $3.50,  1  Suit.  $52.50, 
L.  D.  Miller.  1  Woman's  Suit  $97.50.  63  yds.  Taffeta  @  $3.30.  II.  P. 
Jones,  3  pr.  Shoes  @  $6.25,  2  Suits  @  $42.50,  2  Hats  @  $4.50.  W.  O. 
Anderson,  412  Monroe  St..  1  Cream  Separator  $77.50,  1  Washing  Ma- 
chine. $67.75,  1  pr.  Shoes  $7.50.  W.  D.  Shepard,  872  Pine  St.,  1  Oil 
Stove  $13.50,  1  Set  Silver,  $16.75.  1  Carpet  Sweeper,  $27.50. 

Cash  Tickets:  Cash,  1  Woman's  Suit  $87.50.  Cash,  3  Sweater 
Coats  @  $27.50.  Cash,  1  Washing  Machine  ^85.  Cash,  58  yds.  Satin 
@  $3.50.  Cash.  3  pr.  Gloves  @  $5.25.  62  yds.  Ribbon  @  65c.  Cash, 
4  cs.  Raisins  (5  $4.85.  Cash.  2  Suits  @  $37.50.  Cash,  6  Shirts  @  $3.75. 
Cash,  5  bu.  Potatoes  @  $4.75.    Cash,  1  Cream  Separator  $67.50. 

27.  Paid  bookkeeper  and  office  help  for  the  week  $127.50.  Paid  clerk  hire 
for  the  week  $135.40.    Paid  drivers  of  trucks  for  the  week  $37.50. 

27.  Post  the  books  to  date,  and  ascertain  the  cash  balance. 

29.  Received  $13.75  rebate  from  W.  P.  Dunn  &  Co.  on  bill  for  printing  ad- 
vertising matter.  W.  J.  Brown  returned  $25  of  the  money  taken  to 
be  used  as  expenses  on  buying  trip  on  July  25.  (Credit  Selling  Ex- 
pense.) Received  $15.35  from  Regan  Printing  Co.  for  error  on  bill 
of  July  25,  for  printing  office  stationery.  (Credit  Administrative 
Expense.) 

29.  The  following  are  the  sale  tickets  for  the  day: 

Charge  Tickets:  J.  L.  White,  1615  South  12th  St.,  2  Suits  @  $57.25, 
2  Hats  @  $6.00.  J.  F.  Monroe,  57  yds.  Satin  @  $3.50,  60  yds.  Ribbon 
@  68c,  75  yds.  Sheeting  (a  90c.  J.  II.  Hendricks  1  Woman's  Suit  $95, 
2  Summer  Dresses  @  $16.75,  3  pr.  Shoes  @  $7.25.  C.  W.  Thomas,  1  Set 
Garden  Tools.  $6.75.  1  Cream  Separator  $97.50,  1  Hat  $5.50.  J.  R. 
Dolan,  5  bu.  Potatoes  @  $4.75.  100  lbs.  G.  Flour  $7.50,  2  Suits,  $43.75 
each.  R.  M.  Cruthers,  1  Oil  Stove,  $18.75,  1  Washing  Machine  $87.50, 
1  Carpet  Sweeper  $22.50. 

Cash  Tickets:  Cash,  57  yds.  Satin  @  $3.50.  Cash,  62  yds.  Printed 
Georgette  @  $3.50.  Cash.  54  yds.  Gingham  @  $1.25,  Cash,  80  yds. 
Sheeting  @  95c.  Cash.  1  Woman's  Suit,  $97.50.  Cash,  100  ft.  Gar- 
den Hose,  $18.75.  Cash,  1  Washing  Machine,  $73.25.  Cash,  1  Suit, 
$55. 

29.  Collection  Tickets:  Received  cash  for  the  following  payments  on 
account :  J.  F.  Monroe  $175.  J.  II.  Hendricks  $75,  E.  W.  Thomas  $150, 
R.  M.  Cruthers  $125,  J.  M.  Bryant  $175. 

29.  Paid  J.  M.  Smyth  &  Co.  $784.79  in  full  for  invoice  of  July  17,  deduct- 
in-  3\  discount.  Paid  Eastern  Grocer  Co.  $1,103.37  in  full  for  in- 
voice of  July  17,  deducting  3'/   discount. 


L80  BOOKKEEPING  AND  ACCOUNTING 

30.  The  following  are  the  sale  tickets  for  the  day: 

Charge  Tickets:     W.  <>.  Anderson,  37  yds.  Satin  (g  $3.50,  2  Suit 
$43.75,  W.  D.  Shephard,  2  Women's  Suits  (§   $83.75,  72  yds.  Shi 
ing  Ui   90c,  3  pr.  Shoes  (g   $5.25.     J.  M.  Bryant,  3  Shirl    Waista 
£9.75,  1  Cream  Separator  $125,  2  pr.  -  g   $4-50.     D    P.  Mason,  1 

Washing  Machine,  $87.50,  1  Set  Silver  $22.50.  E.  J.  Roberts,  7.".  yds. 
Taffeta  ,  2  Suits  (5  $47.50,  3  pr.  Shoes  <g  $5.25. 

Cash  Tickets:  Cash,  6  cs.  Ideal  Tomatoes  (5  $5.25,  Cash,  1  Woman's 
Suit.  $97.50.  ('ash.  1  Cream  Separator  $112.50.  Cash,  1  doz.  Collars 
-  !  7.1.  Cash.  :i  lix.  Chocolate  (g  $6.25.  Cash,  5  1>\.  Graham  Cracl 
@  $3.25.  I  lash,  6  es.  Lima  Beans  (§  $3.60.  I  'ash.  100  lbs.  Flour,  $8.00. 
Cash,  1  Carpel  Sweeper,  $27.50.  Cash,  1  Woman's  Suit.  $83.75. 
Cash,  73  yds.  Satin  @  $3.50.  Cash.  7<  yds.  Taffeta  <§  $3.30.  Cash,  1 
Suit.  $62.50. 

30.  Received  $6.75  from  City  Garage  Co.  rebate  on  garage  bill  of  July  26. 

30.  Purchased  merchandise  of  J.  II.  Wiley  &  Co.  [nvoice  No.  27,  3  15, 
n  30,  $726.54;  of  G.  II.  Ransom  &  Bro.  Invoice  No.  28,  3  15,  a  '30. 
£824.95;  of  J.  M.  Smyth  &  Co.  Invoice  No.  29,  3  15,  o  30,  $427.85. 

30.  Collection  Tickets:     Received  '-ash  for  the  following  payments  on 
coui  I  :    J.  h.  White  $75,  W.  I).  Shephard  $135,  W.  O.  Anderson,  $150, 
J.  M.  Bryanl  $150,  I).  P.  Mason  $175,  B.  J.  Roberts  +175. 

31.  The  follow  ing  are  the  sale  tickets  for  the  day: 

Charge  Tickets:  W.  II.  Holmes,  2  Women's  Suits  <„  $67.50,  2  pr. 
cloves  in  sl.7-~>.  I-;.  L.  l'earson,  ~.s  yds.  Satin  (3  $3.50,  7J  yds  Serin 
55e,  45  yds.  Percale  (g  75c.  B.  Mitchell,  3  shin  Waists  (§  $12.75  I 
Sweater  Coats  (§  $27.50,  3  pr.  Shoes  (5  $6.50.  J.  II.  Bendricks,  1 
Cream  Separator  $125,  1  Oil  Stove  $17.50,  1  Washing  Machine  $97.50. 
J.  L.  White,  14  yds.  Printed  Georgette  (§  $3.50,  72  yds.  Taffeta 
1  Suit,  $70. 

Cash  Tickets:    Cash.  1  Cream  Separator  $112.50.    Cash.  3  Sui1 
$42.50.     Cash,  1    Washing  Machine  $72.50.     Cash.  1   Carpel   Sweeper 
$27.50.     Cash,  3  pr.  Shoes  (5    $5.25.     Cash.  3  bu.  Potato  -17.".. 

Cash.  3  cs.  I  tiocolate  (S  $6.25.  Cash.  1  Suit  $52.50.  Cash.  25  lbs. 
Oolong  Tea  (5  78c.  Cash.  65  yds.  Satin  (§  $3.50.  Cash.  1  Woman's 
Suit,  $87.50.  Cash.  56  yds.  Printed  Georgette  (a  $3.50.  Cash.  64  yds. 
Taffeta  (§  $3.30. 

31.  Collection  Tickets:  Received  '-ash  for  the  following  payments  on  ac- 
count: B.  Mitchell  $175,  E.  L.  Pearson  $125,  W.  II.  Holmes  $225,  II.  J. 
Brown  $94.90.    J.  M.  Stone  $30.25. 

31.  You  are  instructed  to  credil  each  partner's  Personal  Account  for  his 
-alary  as  they  do  not  wish  to  draw  their  salaries  at  present.     (Debil 
Selling   Expense  for  one-half  and  Administrative   Expense   for  i 
hali 

31.  The  statement  from  the  petty  cash  fund  shows  the  following  dish 
ments:    Deliverj  Expense  $16.20,  Administrative  Expense  $16.35,  S 

ing  Expense  $29.50.     Debit  these  mi  the  credit  side  of  the  Cash  Hook  and 
make  a  cheek  for  the  total  $62.05  to  restore  the  petty  cash  fund. 
31.  Prepare  a  Trial  Balance  and  after  providing  for  the  following  inven- 
tories, prepare  a  Final  Trial  Balance  before  closing,  from  which  pre- 
pare  a    Profil    and    LoSS   Statement    an. I    Balance    Sheet    and    ch.se    the 


BOOKKEEPING  AND  ACCOUNTING  181 

books.    Bear  in  mind  that  the  partners  share  profits  in  proportion  to 
their  investments. 

Inventories : 

Merchandise    Inventory,   July   31 $18,650.75 

Insurance  Expired 22.50 

Accrued  Assets : 

Interest  paid  in  advance  on  bank  loan 4.50 

Rent  of  store  building  at  the  price  that  could 

be  obtained   - 350.00 

Accrued  Liabilities : 

Unpaid  office  help  for  half  week 63.75 

Unpaid  sales  force  half  week 67.70 

Unpaid  drivers  of  delivery  trucks 18.75 

Interest  accrued  on  Mortgage  Payable 35.00 

Interest  accrued  on  Notes  Payable  10.16 

Deferred  Charges  to  Operation  .- 

Postage  and  office  stationery  on  hand 73.85 

Advertising  matter  on  hand 56.25 

Depreciation : 

5%  on  office    equipment    37.50 

5%  on  store  fixtures    93.75 

5%  on  delivery  equipment   112.50 

2%  on  Building 370.00 

Reserve  for  Doubtful  Accounts : 

2';;   of  debit  balance  of  Accounts  Receivable. . .        174.28 

146.  At  the  end  of  each  month,  a  Trial  Balance  is  taken,  the  Cash  bal- 
anced and  the  Sales  Ledger  proved  with  the  Accounts  Receivable  account  and 
the  Purchase  Ledger  proved  with  the  Accounts  Payable  account.  Monthly 
statements  are  sent  to  each  customer.  The  Profit  and  Loss  Statement  can  be 
made  only  when  an  inventory  is  taken  at  the  end  of  a  period.  Of  course,  in 
a  business  where  the  inventory  can  be  ascertained  at  the  end  of  each  month, 
it  is  well  to  prepare  Profit  and  Loss  Statement  and  Balance  Sheet  every  month 
without  closing  the  books,  and  close  the  books  at  the  end  of  the  fiscal  period, 
only.  In  any  ease,  the  bank  balance  or  cash  balance,  Schedules  of  items  to  be 
collected  and  items  to  be  paid,  with  dates,  can  be  furnished  the  management 
every  day  or  every  week,  and  at  the  end  of  the  month. 

For  a  Departmentized  Business 

147.  If  it  is  desired  to  show  the  progress,  condition  and  profits  of  each  de- 
partment, where  a  mercantile  business  is  departmentized,  special  columns  may 
be  kept  for  each  department  in  the  Purchases  Book  and  the  Sales  Book.  These 
books  may  be  in  the  form  shown  in  Chapter  IX.  and  each  page  proved  in  the 
same  manner,  except  that  the  special  columns  would  be  headed  Dept.  A,  Dept. 
B,  Dept.  C,  or  whatever  the  departments  may  be.  The  accounts  in  the  Ledger 
opened  are  Purchases  Dept.  A,  Purchases  Dept.  B,  etc.,  and  the  Sales  accounts 
opened,  Sales  Dept.  A.  Sales  Dept.  B,  etc.,  for  whatever  departments  are  in 
operation.  In  the  Cash  Book,  these  special  columns  may  be  used,  or  the  cash 
sales  may  be  entered,  Sales  Dept.  A,  in  the  General  column,  which  of  course 
would  cause  more  writing  and  more  posting  than  to  have  special  columns  which 
are  posted  in  totals  at  the  end  of  the  month.  If  a  Sales  Book  is  not  kept,  the 
Cash  sale  tickets  for  each  department  are  kept  separately,  and  the  total  of 


182  BOOKKEEPING  AND  ACCOUNTING 

tin'  tickets  for  each  departmenl  is  entered  on  the  debil  side  of  the  Cash  liook 
cacli  day.  Sales  Dept.  A.  Sales  Dept.  B,  etc. 

148.  From  this  it  will  be  seen  thai  in  order  to  keep  accounts  for  each  de- 
partment the  foregoing  forms  of  books  would  only  need  these  special  columns 
added.  Then  the  system  would  be  the  same  so  far  as  the  principle  of  re- 
ding the  ruin.-  is  concerned.  The  matter  of  Purchases  Returns  and  Al- 
lowances and  Sales  Returns  and  Allowances  would  require  special  attention 
in  order  to  be  applied  to  the  proper  department.  The  Sales  Returns  and 
Allowances  would  be  taken  care  of  in  the  < ' i-<-<  1  i i  Tickets  for  each  depart- 
ment. A  separate  Purchases  Returns  and  Allowances  Hook  may  be  kept  with 
special  columns  for  each  department. 

149.  "Freight,  Express  and  Cartage  In"  and  "Freight,  Express  and  I 
age  Out"  may  be  charged  to  cadi  department  at  the  time  these  charges  are 
paid,  if  it   is  practical  to  apply  the  proper  charge  to  the  proper  department, 

and  where  it  is  not  practical  to  do  so  on  accounl  of  g Is  being  received  in 

mixed  shipments,  these  charges  may  be  debited  to  the  above  accounts  until 
the  end  of  the  period,  and  then  apportioned  to  the  different  departments,  and 
these  accounts  closed  to  t  he  proper  Purchases  Dept.  accounl  for  its  approximate 
portion.     The   Freight,   Express  and  Cartage  Out,  is  a  Selling  Expense  and 

should  be  charged  tO  Sales  Dept.  A,  Sales  I  >ept.  I!,  etc..  for  the  portion  of  eaeh. 

150.  [fa  mercantile  luisMiess  were  selling  two.iines  of  goods,  such  as  Hard- 
ware and  Furniture,  and  were  not  departmentized,  it  may  he  desired  to  ascer- 
tain the  business  facts  about  the  dealings  in  hardware  and  in  furniture  sep- 
arately. Then  a  special  column  headed  "Hardware"  and  a  special  column 
headed  "Furniture"  in  Hie  hooks  of  original  entry  will  give  the  information 

separately    from    which    to   ascertain   the   "cost    of  the    " |s   sold."   the   "Net 

Sales."  the  "Cross  Profit,"  the  "Selling  Cost."  "Administrative  Cost,"  and 
the  net  pi-oiit  for  each  kind  of  goods. 

151.  Consignments:  A  consignment  is  a  shipment  of  ^«nls  by  the  owner 
to  a  second  party  to  he  so  hi  on  commission  for  the  accounl  of  the  shipper.  The 
shipper  is  knov  □  as  the  consignor  and  the  party  to  whom  the  goods  are  shipped 
the  consignee. 

152.  The  consignee  must  exercise  diligence  in  Hie  care  of  the  uoods  received 
on  consignment.  The  degree  of  diligence  depends  upon  the  nature  of  the  goods, 
and  must   he  as  greal  care  as  would  he  reasonable  were  the  goods  i,js  own. 

The  consigi must  keep  the  goods  received  on  consignment  entirely  separate 

from  his  own  goods  or  the  goods  of  others. 

153.  The  consignee  pays  such  charges  as  freight,  drayage,  insurance  or 
■■  1 1 1 y  cost  of  handling,  and  in  many  cases  makes  advanced  payments  to  the 
owner.  When  the  goods  are  sold,  these  charges,  any  advanced  payments 
and  the  agent's  or  consignee's  commission  lor  handling  and  selline  are  de- 
ducted from  the  amount  received  for  the  goods,  ami  the  remainder,  the  net 
proceeds,  is  remitted  to  the  consignor,  should  the  goods  not  sell  tor  enough 
to  pay  the  charges  and  the  commission,  the  consignee  has  a  claim  against 
the  consignor  for  the  deficit.  The  commission.  5%,  or  whatever  the  rate 
charged,  is  calculated  on  the  uross  sales  before  deducting  the  charges. 

154.  This  method  id'  marketing  is  employed  mainly  in  selling  live  stock  and 
country  produce.  When  the  shipment  is  sold  by  the  consignee,  he  renders  an 
Account  Sales  to  the  consignor  along  with  remittance,  or  w  ith  his  letter  inform- 
ing the  consignor  that  the  net  proceeds  shown  by  the  Accounl  Sales  has  been 

placed   to  his  credit   and    is  suhject   to  his  draft.     Tic   A tint    Sales  shows  the 

Selling  Price  and  all  the  charges  and  the  commission  in  detail,  with  the  bal- 
ance due  the  shipper- -t  he  net  proceeds. 

155.  In  some  lines  of  business,  the  method  of  shipping  goods  on  consign- 
ment is  an  advantage  to  both  the  owner  and  the  consignee.  The  consignor  re- 


BOOKKEEPING  AND  ACCOUNTING  183 

(;iins  title  to  the  goods  until  they  are  sold,  and  the  consignee  is  responsible  for 
the  goods,  barring  unavoidable  causes  of  loss  or  damage,  until  they  are  sold. 
After  the  goods  are  sold,  he  is  responsible,  as  an  agent,  for  the  money  due 
the  consignee,  a  misuse  of  which  would  subject  the  consignee  to  criminal  action. 

156.  The  advantage  to  both  parties  lies  in  the  probable  fact  that  the  con- 
signee may  not  be  financially  able  to  buy  the  goods  outright,  but  has  the  ability 
and  facilities  for  selling;  and  the  consignor,  without  relying  upon  the  con- 
signee's ability  to  pay.  has  the  opportunity  to  place  his  goods  where  they  can 
be  moved,  being  protected  by  the  fact  that  the  consignee  will  not  use  the 
money  or  goods  wrongly  that  does  not  belong  to  him  for  the  reason  already 
mentioned.  In  thus  shipping  goods  on  consignment  to  be  sold  on  commission, 
great  care  must  be  exercised  by  the  shipper  to  have  the  papers  positively  show 
that  the  goods  are  shipped  on  consignment,  thus  establishing  the  ownership.  If 
this  cannot  be  shown,  the  value  of  the  goods  may  become  an  open  account, 
which  would  be  a  very  different  matter. 

157.  Consignor's  Records:  C.  P.  Emory  &  Co.  shipped  to  Senter  Grain  Co. 
to  be  sold  for  their  account.  500  bu.  R.  Wheat.  C.  P.  Emory  &  Co.  paid  for 
loading  car  $12.50.  Senter  Grain  Co.  paid  freight  $65.30,  labor  $16.50,  in- 
surance, $5.50,  and  sold  wheat  for  $1.75  per  bu..  $875,  and  charged  $13.75 
storage  and  5%  commission,  remitting  the  net  proceeds,  $730.20. 

The  records  in  the  books  of  C.  P.  Emery  &  Co.  are : 

( lonsignment  No.  1,  to  Senter  Grain  Co $12.50 

Cash   $12.50 

For  loading  car  of  wheat. 

Then  on  receipt  of  the  Account  Sales  and  the  remittance  for  the  net  pro- 
ceeds : 

Cash   $730.20 

Consignment  No.  1,  Senter  (train  Co $730.20 

For  net  proceeds  shown  by  Account  Sales  received  this  date. 

Const.  No.  1,  Senter  Grain  Co $717.70 

Sales    $717.70 

To  transfer  net  proceeds  to  Sales  account  and  to  close  the  consignment  account. 

The  first  two  entries  would  be  Cash  Book  entries,  but  are  shown  as  journal 
entries  for  convenience.  The  last  entry  is  a  journal  entry.  When  these  entries 
are  posted,  the  Consignment  account  will  be  closed  and  Sales  account  credited 
for  the  amount  of  the  sale.  At  the  end  of  a  period,  any  consignment  that  has 
not  been  reported  sold  must  be  included  in  the  Merchandise  Inventory.  The 
term  "Shipment"  or  "Consignment"  may  be  used.  Both  are  used  in  this 
illustration. 

158.  Consignee's  Records:  The  records  in  the  books  of  Senter  Grain  Co. 
for  the  shipment  are: 

Shipment  No.  1,  C.  P.  Emerv  &  Co $87.30 

Cash  $87.30 

Paid  freight  $65.30,  Labor,  $16.50,  Insurance,  $5.50. 

"When  the  consignment  is  sold  the  entry  is  made  to  record  the  commission 
and  storage. 

Shipment  No.  1,  C.  P.  Emery  &  Co $57.50 

Commission  5%   $43.75 

Storage    '  3.75 

For  Commission  and  Storage  charges  on  Shipment  No.  1,  < '.  I'.  Emery  &  Co. 

Cash   $875.00 

Shipment  No.  1,  C.  P.  Emery  &  Co $875.00 

To  record  the  sale  of  this  shipment. 

Shipment  No.  1,  C.  P.  Emery  &  Co $730.20 

Cash   ' $730.20 

To  record  the  payment  of  the  net  proceeds  of  Shipment  No.  1,  C.  P.  Emery  &  Co. 


184 


BOOKKEEPING  AND  ACCOUNTING 


159.  Of  course  all  these  entries  would  lie  < 'ash  Rook  entries  except  the  entry 
to  record  the  Commission  and  Storage,  but  the  results  are  the  same.  If  the 
st  in  lent  will  set  up  T-Ledger  accounts  and  posl  the  entries  for  the  Consignor,  and 
then  set  up  another  set  of  T-l.ede.er  nmuiiits  an.l  posl  the  entries  for  the  Con- 
signee, the  records  will  appear  clearly.  It  will  show  that  the  consignment 
accounl  oft!  ignor  is  closed  and  the  result  is  the  same  as  a  sale  of  $717.70 
for  cash.    The  s >nd  set  will  show  the  Shipmenl  account  of  the  Consignee  is 

close,!  and   it    will  appear  that   Senter  Grail]  Co.  have  retained  $57.50  cash.  : 

have  a  ereilit  to  commission  accounl  foe  $43.75  ami  Storage  accounl  for  $13.75. 
A  second  shipment  to  the  same  party  is  called  shipment  No.  2  or  Consignment 
No.  i'.  Always  write  the  name  of  tin-  person  or  firm  after  the  shipment  No.  or 
Consignment  No. 

160.  In  tl \ ei it  the  net  proceeds  are  not  remitted  by  Senter  drain  Co.,  the 

consignee,  bul  placed  to  the  credil  of  the  consignor,  C.  I'.  Emery  &  Co.,  the 
consignor's  record  would  be: 

Sen'  i  Co $730.20 

Consignment  No.  L,  Senter  Grain  Co $730.20 

For  not  down  by  A. -count   Sales  ir.rivcl  this  date. 

161.  The  entry  to  close  the  i  lonsignment  account  and  transfer  the  balance  of 
the  Consignment  account  to  Sales  accounl  would  he  the  sane-  as  the  entry  given. 
The  consignee,  in  that  case,  would  make  the  last  entry  as  follows: 

Shipmi  lit  No.  1,  C.  P.  Emery  &  Co $730.20 

C.  P.  Emerj  £  Co ' *7;;e.L'n 

To  credil  the  net  proceeds  of  this  shipment  to  the  consignor. 

162.  The  following  is  a  form  of  Account  Sales  submitted  by  the  consignee. 

li  has  no  connection  with  the  foregoing  hut  is  given  to  show  how  the  sales, 

charges  ami  net  proceeds  may  he  shown.  Any  unsold  items  may  he  stated  fol- 
lowing the  record  of  sales,  for  the  convenience  of  the  consignor.  Any  facts 
may  he  briefly  stated. 


ACCOUNT  SALES. 


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ILLUSTRATION    NO.    7!).      ACCOUNT    SALES 


BOOKKEEPING  AND  ACCOUNTING  185 

163.  When  merchandise  is  shipped  to  be  sold  on  commission,  the  shipper 
sends  an  Invoice  of  Shipment  to  the  Commission  Merchant,  listing  t lie  goods 
shipped.  Usually,  the  cost  prices  of  these  goods  are  not  given  on  the  Envoice 
of  Shipment,  in  fact  it  is  unnecessary  to  show  them.  The  consignor  usually 
keeps  a  Shipment  Book  ruled  in  the  same  form  as  the  Invoice  of  Shipment,  in 
which  the  memorandum  of  each  shipment  is  recorded,  hut  no  entry  is  made  in 
the  financial  records  until  the  shipment  is  sold  and  the  Account  Sales  showing 
the  Net  Proceeds  is  received.  Of  course,  any  expense  in  making  the  shipment 
would  be  charged  to  the  Consignment  No.  1,  or  No.  2,  or  Shipment  No.  1  or 
No.  2,  etc.,  followed  by  the  name  of  the  Consignee. 

If  the  Consignee  should  render  an  Account  Sales  and  state  that  the  net 
proceeds  are  placed  to  the  credit  of  the  consignor  and  subject  to  draft,  then  the 
entry  to  record  the  net  proceeds  would  be  "Debit"  the  name  of  the  consignor 
ami  credit  the  consignment.  Then  the  consignment  may  be  closed  and  trans- 
ferred to  Sales  Account. 

164.  C.  0.  D.  Account  and  Shipments:  When  goods  are  shipped  C.  0.  D. 
(collect  on  delivery)  by  express,  the  Express  Company  may  be  charged  for  the 
amount  of  the  C.  0.  D.  and  credited  when  the  returns  are  received.  Goods 
shipped  C.  0.  D.  Parcel  Post  may  be  charged  to  Parcel  Post  Shipments,  but  it 
is  suggested  that  the  customer's  account  be  charged  for  the  amount  the  same 
as  if  sold  on  account,  but  write  C.  0.  D.  in  the  explanation  column,  and  make 
the  same  indication  on  the  credit  when  the  return  is  received. 

165.  When  a  shipment  is  sent  C.  0.  D.  by  express  or  Parcel  Post,  the  usual 
forms  of  papers  furnished  by  the  Express  Company  and  the  Post  Office  are 
filled  out.  These  forms  are  blank  forms  and  simple  to  prepare.  They  change 
the  forms  occasionally,  so  it  is  not  necessary  to  show  them  here. 

166.  When  a  shipment  is  sent  by  freight  C.  0.  D.  an  "order  bill  of  lading" 
(C.  0.  D.  form)  is  used  instead  of  the  usual  bill  of  lading,  or  the  regular  bill  of 
lading  may  be  used,  made  out  to  ourselves  with  an  order  written  on  the  bill  of 
lading  directing  that  the  goods  be  delivered  to  the  customer.  A  sight  draft 
on  the  customer  for  the  amount,  in  favor  of  the  bank,  is  attached  to  the  bill  of 
lading  and  sent  to  the  bank  with  instructions  to  deliver  the  bill  of  lading  to  the 
customer  upon  payment  of  the  draft.  The  bank  at  destination  will  notify  the 
customer  who  will  pay  the  draft,  get  the  bill  of  lading  and  then  receive  the 
goods  from  the  agent  at  his  station.  In  this  way.  it  is  necessary  for  the  customer 
to  pay  the  draft  before  he  can  get  the  bill  of  lading  authorizing  the  goods  to  be 
delivered  to  him. 


186 


BOOKKEEPING  AND  ACCOUNTING 


PROBLEM  15.     MANUFACTURING  STATEMENTS 

LG7.  The  merchant  buys  goods  to  be  sold  for  profit.  The  manufacturer 
makes  the  goods  or  articles  which  he  sells  for  profit.     The  cost  of  the  finished 

Is  I 'j  In  l'.\  tin-  merchant  to  be  sold  is  shown  in  the  Merchandise  Lo>  entory, 

Purchases  and   Freighl    In  accounts.     The  manufacturer  buys  raw  materials, 
hires  labor,  and  pays  other  necessary  expenses  to  produce  the  goods  he  sells, 
the  cosl  of  which  is  shown  by  the  Materials  account,  Labor  account,  Factoi 
Expense  account,  and  any  other  account  thai  affects  the  "cosl  to  make." 

The  Balance  Sheel  in  a  Manufacturing  business  is  prepared  the  same  as  in 
,i   Mercantile  business.     The   Profit   and   Loss  Statement   in  a   manufacturi 
business  is  very  similar  id  that  of  a  trading  business,  in  thai  the"  Manufacturing 
cosl  of  goods  sold"  must  lir  deducted  from  the  uel  sales  to  obtain  the  "gross 
profit." 

The  following  is  the  Pinal  Trial  Balance,  before  closing,  of  the  Davis  Manu- 
facturing Co.,  nn  December  31,  192  .  at  the  close  of  the  year's  business,  from 
which  prepare  a  Balance  Sheel  and  Profit  and  Loss  Statement. 

Final  Trial  Balance  before  Closing,  Davis  Manufacturing  Co.  Deo.  31,  19 


Preferred  Capital  Stock  

Common  Capital' Stock   

unsubsorlbed  Common  Stock  

Surplus  

Cash  on  hand  and  in  bank   

Rotes  Receivable   

Aocounts  Receivable  

Unexpired  lnsuranoe  

Fostage  and  Stationery  on  hand   

Machinery  

T00I3   

Office  Equipment   

Building') Factory )   

Notes  Payable 

Aocounts  Payable   

Aocrued  Liabilities  (Unpaid  payroll)   .  . 

Reserve  for  Doubtful  Accounts  

Reserve  for  Depredation  on  Machinery  .  . 
Reserve  for  Depreciation  on  Building  .  . 
Reserve  for  Depreciation  on  Offioe  Equip. 
Reserve  for  Depreciation  on  T00I3  .... 
Raw  Materials  Inventory,  Jan.  1  .... 
Finished  Goods  Inventory,  Jan.  1  .... 
Raw  Material  in  Process  Inventory , Jan.  1, 
Labor  in  Process  Inventory,  Jan.  1,  .  .  . 

Raw  Materials  Purchased   

Purchases  Discount  -  

Direct  Labor   .  . 

Freight  In   

Sales 

Sales  Returns  and  Allowances   

Sales  Discount   

Manufacturing  Expense  

Selling  Expense  

Administrative  Expense   

Interest  and  Discount  

collection  and  Exohange  


5000 

16650 

27500 

36967 

250 

175 

20000 

5400 

3250 

21250 


12500 

27375 

1500 

1750 

162150 

22500 
3750 


2250 
1250 
24650 
7500 
7115 
17561  85 
525!  00 


41501  1  '-'l 


50000 
50000 

12500 


20500 

34631 

1150 

779 

2000 

637 

325 

540 


650 
241301 


415014 


9£ 


ILLUSTRATION    NO.    80.      PINAL   TRIAL    BALANCE 

Inventories  Deeeinher  31  : 

l.'au  Materials $27,500 

Finished  Goods 35,250 

Materials  in  process 

Labor  in  process 1,875 


BOOKKEEPING  AND  ACCOUNTING  187 

The  following  are  the  details  of  Manufacturing  Expenses,  .+24,050,  Selling 
Expense,  $7,500,  and  Administrative  Expense.  +7,115.00.  shown  in  the  Trial 

Balance  and  are  considered  in  preparing-  the  l'rolit  and  Loss  Statement : 

Manufacturing  Expenses:  Selling  Expense: 

Taxes  on  factory $350.00         Freight   Out    $450.(10 

Stationery  and  Supplies 4:25.00        Shipping  Expense 575.00 

Insurance  on  material  and  build-  Commission 1200.00 

ing   375.00        Salesmen's  Salary 4000.00 

Superintendence    5900.00         Advertising    1275.00 

Engineers  and  Firemen 6512.00  

Foremen's  Salary  6600.00                                                                           $7,500.00 

Fuel  and  Light . ". 725.00 

Building  Repairs 564.85  Administrative  Expense: 

Machinery  Repairs 375.00         Office  Expenses $2115. (ill 

Boiler  Repairs 185.65         Office  Salaries   4000.00 

Dep.  on  Building 637.50          Director's  Fees 300.00 

Dep.  on  Machinery 2000.00         Attorney's  Fees   700.00 


$24,650.00  $7,115.00 

Note:  The  above  items  might  take  the  place  of  these  expense  accounts  in  the  Trial 
Balance.  They  are  presented  as  above  to  shorten  the  Trial  Balance.  These  separate 
detailed  statements  should  be  submitted  to  the  management  from  which  they  may  study 
the  expenses,  if  they  are  not  entered  in  detail  in  the  Profit  and  Loss  Statement.  (See  Illus- 
tration No.  25.) 

Profit  and  Loss  Statement,  Davis  Manufacturing  Co.,   Dec.  31,   19 

Sales    $241,301.00 

Less  Sales  Returns  and  Allowances $2,250.00 

Less  Sales  Discount 1,250.00  3,50(1. no 


Net  Sales  $237,801.00 

Prime  Cost: 

Raw  Materials  Inventory  Jan.  1 $12,500.00 

Raw  Materials  in  process,  Jan.   1 1,500.00 

Labor  in  process,  Jan.  1 1,750.00 

Purchases  Raw  Material 162,150.25 

Freight   In   3,750.09 

Direct  Labor   22,500.00     $204,150.25 


Less  Raw   Materials,   Dee.   31 $27,500.00 

Less  Raw  Materials  in  process,  Ore.  ::i 2,250.00 

Less  Labor  in  process,  Dec  :;l 1,875.00         31,625.00 

Prime  Cost   $172,525.25 

(72.55%  of  sales) 

Factory  Overhead: 

Taxes  on  factory $350.00 

Stationery  and  Supplies 425. 00 

Insurance  on  Material  and  Machinery :;75.00 

Superintendence   ' 5,900.00 

Engineers  and  Firemen 0,5 12.no 

Foremen 's    Salary     6,600.00 

Fuel  and  Light... 725.00 

Building  Repairs 504.85 

Machinery  Repairs 375.00 

Boiler  Repairs 185.65 

Dep.  on  Building 637.50 

Dep.  on  Machinery 2,000.00 


Factory  Overhead  (10.36%  of  sales) $24,650. 


00 


Total  Manufacturing  Cost $197,175.25 

(82.91%  of  sales.)    carried  for'd 


1.-  BOOKKEEPING  AND  ACCOUNTING 

Total   Manufacturing   Cost,    Brot,    For'd 

Add  Inventory  Finished  G Is,  Jan.  1 27,375.35 

D    lucl   Inventory  Finished  G Is,  Dec.  31 35 

Manufacturing  sold $189,300.60 

79.6  .   -.1       I  

Gross    profit    ou    sales >  18,500.40 

Selling  Cost: 

Freight  Out   $450.00 

Shipping   Expense  575.00 

Col   ■               1,200.00 

8ah               3alary    4,000.00 

Advertising 1,275.00 

Selling  Ci  oi  sales) $7,500.00 

Administrati 

Office  Expi  uses  $1,250.00 

Office  Salaries  4,000.00 

I'm  Pees  30' i 

Attorney  's  Fees   700.00 

Cost  of  Administration  (2.6395    of  sales) $7, 115.00        $14,615.00 

Gross  Business  Profit $33,885.40 

Deductions  from  Income: 

Interest  and  Discount $1,756.85 

Collection  and  Exchange 52£  2,281.{ 

(.9695   of  sale  

$31,6 

Add   Other  Income: 

Purchase     Discount   (.2795   of  sales) 

Net  Business  Profit   (13.9395   ol  sales) 253.80 

Carried  to  Surplus. 

ILLUSTRATION    NO     82.      PROFIT    AND    I.oss    STATEMENT.      MANUFACTURING 

Proof  of  Percentages: 

Manufacturing  cost    79.6  '•  of  sales 

Selling  cost   .f.15  .  oi  sales 

Administration   rest    2.639o  of  sales 

Other  deductions 96%  of  sales 

86.34' .  of  sales 
Less  other  Income 27'  I  of  sa 

86.07' I  of  sales 
Add    net     profit 13.93%  of  sales 

Total  100      '.  of  sales 

>  :     The  student  will  observe  thai   Purchases  Discount  $650.25  is  treated  as  "Other 

I me"  instead  of  being  deducted  from  the  cost  of  purchases  as  was  .lone  previously  in  a 

trading   business.     Some   accountants    insist    that    tliis    item   should    be   treated    as   a    non- 
operating  income  whether  in  a  trading  business  or  a  manufacturing  business. 


BOOKKEEPING  AND  ACCOUNTING 


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190  BOOKKEEPING  AND  ACCOUNTING 

168.  The  Board  of  Directors  of  the  Davis  Manufacturing  Co.  have  mel  and 
declared  a  dividend  of  K>\   on  the  Preferred  Stock  and  l.v,   on  the  Comn 
sinck.     ' I ' 1 1 . ■  \     have    instructed    thai    an    additional    "Reserve    for    Doubtful 
Accounts"  for  $3,000  be  Bel  up. 

After  preparing  the  Balance  Sheet  and  Profil  and  Loss  Statement,  pn  , 
journal  entries  to  sel  up  the  Dividend  Accounts  and  to  <-ivdit  the  Reserve  for 
Doubtful  Accounts.     Assuming  the  Nominal  accounts  have  been  closed   into 
Profit  and  Loss  Account,  the  6rs1  journal  entry  would  be  ;h  follows: 

Profil  and  Loss $32.2.">3.80 

Reserve  for  Doubtful  Accts $3,000.00 

Surplus  29,253  80 

When  this  entry  is  posted,  Profil  and  Loss  account  will  be  closed,  the  addi- 
tional reserve  credited  to  Reserve  for  Doubtful  Accounts,  and  the  remaining 
Surplus  carried  to  the  Surplus  account.  The  uexl  entry  is  to  take  the  amount 
to  be  paid  as  dividends  to  stockholders  out  of  the  Surplus  account  and  to  open 
the  Dividend  Accounts: 

Surplus  .-);14,250.00 

Dividend  No.  1.  Preferred  Stock..  $7,500.00 

Dividend  No.  1,  Common  Stock ;.. .  li.T.'.iiini 

When  this  entry  is  posted,  the  Dividend  Accounts  will  be  opened  and  the 
Surplus  account  will  show  the  balance  of  Surplus.  As  these  Dividends  are  paid 
by  check,  debit  the  proper  dividend  account  on  the  credit  side  of  the  Cash  Book. 

When  the  dividends  are  paid  and  the  (ash  Hook  entries  are  posted,  the  Divi- 
dend Accounts  will  I losed.    The  student  will  find  it  very  interesting  in  the 

study  of  these  statements,  to  set  up  the  "Nominal"  ace, units  and  close  them  !>y 
journal  entries,  and  then  post  the  preceding  journal  entries  to  distribute  tin- 
profit  as  shown  by  the  I'rolit  and  Loss  are. unit. 

The  Profil  and  Loss  statement  ean  be  arranged  in  the  same  form  as  the 
Balance  Sheet  hut  in  sections,  showing  the  Manufacturing  Section,  the  Trading 
Section,  the  Administrative  Section,  the  Profit  and  Loss  Section  and  the  Appro 
pi'iation  or  Distribution  of  Profits  Section,  to  conform  to  the  Manufacturing  Ac- 
count, Trading  Account,  Administrative  Account,  Profit  and  Loss  Ac-, , nut  and 
Appropriation  Account  as  shown  at  the  end  of  Problem  20,  but   the  form  shown 

is  more  convenient  to  write  ou  the  typewriter. 


PROBLEM  16.      O.  C.  NELSON  MANUFACTURING  CO. 

169.  The  following  is  the  Trial  Balance  of  the  O.  C.  Nelson  Manufacturing 
Co.  at  tin'  dose  of  the  year's  luismess.  December  31,  192  .  Provide  for  the 
inventories  which  follow,  and  prepare  a  Final  Trial  Balance,  Balance  Sheet 
and  Profit  ami  Loss  State at.     Tin-  depreciation  on  building,  machinery  and 

tools   and    Hauling    Equipment    are    charged    or   deducted    in    the    Pactorj     Over- 
head, as  in  the  pn ling  statement.    The  depreciation  on  Office  Equipment  is 

included  in  Administrative  cost.    The  other  inventories  are  used  as  shown  in  the 
preceding  statement. 


BOOKKEEPING  AND  ACCOUNTING 


191 


Trial  Balanoe.  0.  C.  Kelson  Manufacturing  Co.  Deoember  31,  192 


Capital  Stock  

Unsubsoribed  Stock  

Surplus ■ . 

Cash    

Acoounts  Receivable  

Notes  Receivable   

Notea  Payable  

Accounts  Payable   

Reserve  for  Doubtful  Acoounts  .... 
Notes  Receivable  Discounted  ...... 

Office  Equipment   .  .  .  .  

Hauling  Equipment  

Building  (Factory)   

Machinery  

Toola   

Raw  Materials  Inventory,  Jan.  1..  .  . 
Raw  Material  in  Process,  Jan.  1  .  . 
Fini8hed  Goods  Inventory,  Jan.  1   .  . 

Furohaaea,  Raw  Material  

Returns  and  Allowancea  from  Purchases 

Disoount  on  Purchases   

Freight  In  

Direct  Labor   

Fuel  and  tight   

Indirect  Labor   

Stationery  and  Supplies  *. 

Foremen's  Salary   

Building  Repairs   

Machinery  Repairs  

Insurance  on  Material  and  Faotory  .  . 

Sales    

Sales  Returns  and  Allowances   

Sales  Discount   

Freight  Out  

Shipping  Expense   

Hauling  Expense    

Commission   

Salesmen's  Salary  

Traveling  Expenses   

Advertising  

Warehouse  Expense  

Office  Expense   

Office  Salaries  

Director's  Fees  


75000 

00 

10000 

00 

5000 

00 

17535 

10 

39750 

75 

21564 

50 

19800 

00 

21375 

85 

800 

00 

2500 

00 

2375 

00 

4500 

00 

17500 

00 

16750 

00 

2500 

00 

11875 

25 

4238 

40 

18945 

36 

107649 

80 

1235 

75 

826 

60 

1250 

00 

22437 

60 

2260 

00 

1250 

00 

775 

60 

4765 

00 

475 

00 

425 

46 

500 

00 

206869 

65 

542 

65 

2125 

40 

721 

35 

235 

40 

1150 

00 

1323 

75 

4000 

00 

1200 

00 

1050 

25 

845 

55 

3250 

00 

7200 

00 

450 

00 

333407 

05 

333407 

05 

Inventories :  Dec.  31,  192  . 

Raw  Materials,  Dee.  31 $9,540.75 

Raw  Materials  in  process,  Dec.  31 1,750.00 

Labor  in  process,  Dec.  31 1,125.00 

Finished  Goods,  Dec.  31 13,976.40 

10%  depreciation  on  office  equipment 237.50 

1095  depreciation  on  hauling  equipment 450.00 

5"  I  depreciation  of  building 875.00 

20%  depreciation  on  machinery :{.35(>.i)U 

20%  depreciation  on  tools 500.00 

Additional  Reserve  for  Doubtful  Accounts 2,000.00 


CHAPTER  IX 

CENTRAL  FOUNDRY  COMPANY.  INC. 

Manufacturing  Iron,  Brass,  Sand  Blast  and  Phosphorus  Bronze  Castings. 

170.  The  Books  to  be  used  are  the  Purchases  Book,  Sales  Hook.  Journal, 
Cash  Book,  Pettj  Cash  Book,  Notes  Receivable  and  Payable  Book,  General 
Ledger,  Sales  Ledger  and  Purchases  Ledger.  Eight  special  columns  are  required 
for  the  Purchases  Book,  four  special  columns  for  the  Sales  Book,  three  special 

coll is  on  the  debit   side  of  the  Cash   Book,  and  four  Special   columns  on  the 

credit  side  of  the  Cash  Book.  The  Petty  Cash  Bonk  requires  four  special 
Columns  and  the  -Journal  requires  three  money  columns  on  each  side.  The 
necessary  columns  are  shown  in  the  illustrations  which   follow. 

171.  The  accounts  in  the  General  Ledger  should  be  opened  in  the  order  to 

be  most  convenient  for  preparing  the  .statements  from  the  Trial  Balance,  when 
taken,  or  tlcy  may  be  arranged  in  the  Trial  Balance  with  the  asset,  liability  and 
capital  ai-ci  unts  grouped,  and  the  cost  accounts  and  sales  grouped,  and  the 
operating  expense  accounts  grouped,  when  the  Trial  Balance  is  prepared. 

172.  If  separate  books  are  not  used  for  the  Sales  Ledger  and  the  Purchases 
Ledger,  they  should  each  be  given  a  separate  section  in  the  Ledger  to  represent 
the  Sales  Ledycr  which  is  controlled  by  Accounts  Receivable  account,  and  the 
Purchases  Ledger  which  is  controlled  by  Accounts  Payable  account.  The  Motes 
Receivable  account  controls  the  Notes  Receivable  Book,  and  the  Notes  Payable 

account  controls  the  .Votes  Payable  Book.  The  Petty  Cash  account  controls 
the  Petty  Cash  Book.  These  books  should  be  proved  against  these  accounts 
at  the  end  of  the  month. 

11'A.  There  are  three  principal  elements  in  the  cost  of  manufacture,  "Cosl  of 
Material,"  "<  lost  of  Labor"  and  the  "  Manufacturing  Expense.*'  The  accounts 
kept  to  control  these  costs  are  ".Materials"  account  i  or  Paw  .Materials  account  I, 
"Labor"  account  (direct  labor',  and  "Factory  Expense,"  or  "Manufacturing 
Expense"    (which    includes    indirect    labor).    The    ".Materials"    or    "Raw 

.Material"  may  be  represented  by  two  or  mote  accounts  according  as  various 
materials  are  used.  The  accounts,  as  controlling  accounts  are  used  in  the  busi- 
ness of  the  Valley  Tanning  Co.,  Paragraph  "-'40. 

Cost  of  Material  -f-  Direct  Labor  =  Prime  cost. 

Prime  Cost -f- Manufacturing  Expense  Manufacturing  cost  or  cost  to 
make. 

Manufacturing  Cost  +  Administrative  Expense  =    Total  Cost. 

174.  The  Journal  is  not  shown  because  it  is  the  same  form  as  in  Chapter  VI. 
The  preliminary  wording  for  the  opening  entry  for  a  corporation  has  been  pre- 
sented under  "Corporation  Accounting."  The  journal  entries,  following  the 
usual  preliminary  wording  in  the  Journal,  for  this  business  are: 

March  1 

Subscriptions   $71,500.00 

I'nsiil.s.Tilic.l  stock   3,500.00 

I  apita!  Stoci -7.-mio0.00 

As  per   Subscript  inn    Book. 

192 


BOOKKEEPING  AND  ACCOUNTING 


193 


Cash   $42,500.00 

Buildings    15,000.00 

Land    5,000.00 

Machinery    12,000.00 

Subscriptions   

Surplus 

Received  in  payment  of  all  subscriptions  to  the  Capital  Stock  of  this  company  as  per 
Minute  Book,  and  Subscription  Book,  and  stock  issued  as  per  Stock  Certificate  Book. 


$71,500.00 
3,000.00 


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ILLUSTRATION   NO. 


SALES   BOOK 


175.  The  amount  entered  in  the  "Amount  Debit"  column  of  the  Sales  Book 
is  posted  to  the  debit  of  the  account  written  on  the  same  line  with  it.  Observe 
that  the  amount  in  the  "Amount  Debit"  column  is  distributed  to  the  special 
columns.  Care  should  be  taken  at  the  time  the  entry  is  made,  to  distribute 
the  proper  amount  to  the  proper  special  column.  At  the  end  of  the  month, 
the  total  of  each  special  column  is  posted  to  the  credit  of  the  proper  sales 
accounts,  and  the  total  of  all  sales  is  posted  to  the  debit  of  Accounts  Receivable 
account,  thus : 

Accounts  Receivable  Dr $58,452.96 

Sales  Phos.  Bronze  Castings  Cr..  . 

Sales  Brass  Castings  Cr 

Sales  Sand  Blast  Castings  Cr.  . . . 

Sales  Iron  Castings  Cr 

$58,452.90 

176.  The  total  of  the  General  or  "Amount  Credit"  column  is  the  total  of  all 
sales  and  is  the  amount  to  be  posted  to  the  debit  of  Accounts  Receivable.  The 
sum  of  all  the  totals  of  the  special  columns  must  equal  the  total  of  the  General 
column.  This  is  the  proof  of  the  page  when  transferring  to  a  new  page.  The 
cash  items  in  the  Sales  Book  are  checked  and  not  posted,  and  are  entered  in  the 
Cash  Book,  and  checked  there.  In  this  way  cash  is  debited  in  the  Cash  Book 
and  Sales  is  credited  from  the  Sales  Book. 


$15,739.00 
20,285.54 
11,873.97 
10,554.45 


194 


BOOKKEEPING   AND  ACCOUNTING 


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ILLUSTRATION    NO    SI.      DEBIT  SIDE   OF  CASH   BOOK 

177.  From  the  debil  side  of  the  Cash  Book,  post  the  items  in  the  General 
column  to  the  eredil  of  the  account  written  on  the  same  line.  Posl  the  items 
in  the  Accounts  Receivable  column  to  the  eredil  of  the  customers'  accounts 
in  the  Sal*  Ledger,  posting  the  item  in  the  Sales  Discount  column,  at  the 
same  time,  on  the  pfexl  line  to  the  credit  of  the  customer's  account.  At  the 
time  of  making  an   entry,   transfer  the  cash   received   to   the   Bank  column. 

178.  At  the  end  of  the  month,  the  total  of  Accounts  Receivable  column  is 
(posted  to  the  ei-edit  of  Accounts  Receivable  account  in  the  General  Ledger. 
The  total  of  Sales  Discount  column  is  posted  to  the  debit  of  Sales  Discount 
account  and  also  to  the  eredil  of  Accounts  Receivable  account.  Observe  that 
the  "Cash  Sales"  entries  are  checked.  They  come  from  the  Sales  Book  where 
i  he\  are  checked  also. 


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ILLUSTRATION    NO.    85.      CREDIT    SIDE   OF   CASH    BOOK 

179.  From  the  credit  side  of  the  Cash  Hook,  post  the  items  in  the  General 
column  to  the  debil  of  the  respective  accounts.     Post  the  items  in  the  Accounts 


BOOKKEEPING  AND  ACCOUNTING  195 

Payable. column  to  the  debit  of  the  creditors'  accounts  in  the  Purchases  Ledger, 
and  at  the  same  time,  on  the  next  line,  post  the  item  in  the  Purchases  Discount 
column  to  the  debit  of  the  creditor's  account  in  each  case.  At  the  time  of 
making  an  entry,  enter  the  number  of  the  check  in  the  "Check  No."  column  and 
transfer  the  amount  to  the  Bank  Column.     The  Check  No.  column  is  at  the  right. 

180.  At  the  end  of  the  month,  post  the  total  of  Administrative  Expense 
column  to  the  debit  of  this  account  in  the  General  Ledger.  Post  the  total  of 
Accounts  Payable  column  to  the  debit  of  Accounts  Payable  account.  Post  the 
total  of  Purchases  Discount  column  to  the  credit  of  Purchases  Discount  account 
and  also  to  the  debit  of  Accounts  Payable  account. 

181.  To  ascertain  the  cash  balance,  find  the  sum  of  the  totals  of  the  first 
two  columns  of  the  debit  side  of  the  Cash  Book,  and  from  this  sum  deduct  the 
sum  of  the  totals  of  the  first,  second  and  fourth  columns  of  the  credit  side  of 
the  Cash  Book.  The  total  of  the  Bank  column  will  always  equal  the  total  of  the 
first  two  columns.  This  will  be  a  proof  of  addition  when  transferring  to  a  new 
page,  and  when  ascertaining  the  cash  balance.  When  a  deposit  is  made  in  the 
bank,  total  the  Bank  column  to  that  date  in  small  figures  and  rule  a  red  ink  line 
under  the  last  item  deposited  or  write  the  date  in  small  figures  to  show  what  has 
been  deposited. 

182.  To  reconcile  the  Bank  Statement,  check  the  checks  shown  on  the  Bank 
Statement  against  your  cheeks  in  the  Bank  column  of  the  credit  side  of  the 
Cash  Book.  Check  the  deposits  shown  on  the  Bank  Statement  against  the 
deposits  indicated  in  the  Bank  column  of  the  debit  side  of  the  Cash  Book.  Add 
the  sum  of  cash  not  deposited  to  the  Bank  Balance  and  deduct  the  sum  of  the 
checks  issued  but  not  yet  paid  by  the  Bank,  and  this  will  reconcile  your  cash 
balance  with  the  bank  balance. 

183.  In  opening  Ledger  accounts,  allow  12  lines  each  for  Sales  Returns  and 
Allowances,  Purchases  Returns  and  Allowances,  Selling  Expense,  Hauling  Ex- 
pense, and  Union  Sand  Co.  Allow  eight  lines  for  all  other  accounts.  In  posting 
from  the  Purchases  Book,  use  the  word  Purchases  before  the  name  of  each 
kind  of  material  purchased.  At  the  end  of  the  month,  the  total  of  each  special 
column  is  posted  to  the  debit  of  the  proper  Purchases  account:  Purchases 
Sand,  Purchases  Coke,  Purchases  Copper,  Purchases  Oil,  Purchases  Iron,  Pur- 
chases Zinc,  Purchases  Coal,  Purchases  Phosphorus.  Each  amount  in  the 
General  column  is  posted  to  the  credit  of  the  creditor's  account  in  the  Pur- 
chases Ledger,  and,  at  the  end  of  the  month,  the  total  of  the  General  column 
is  posted  to  the  credit  of  Accounts  Payable  account,  in  the  General  Ledger. 

184.  The  Petty  Cash  Book  is  controlled  by  the  Petty  Cash  account.  The 
amount  paid  out  of  this  fund  is  restored  from  time  to  time  when  necessary, 
and  the  amounts  are  charged  to  the  various  expense  accounts  affected,  so  that 
the  amounts  paid  out  of  this  fund  are  properly  recorded  in  the  books  without 
disturbing  the  original  Petty  Cash  account.  The  Petty  Cash  Book  should  be 
balanced  as  often  as  the  fund  is  restored.  This  book  may  have  special  columns 
for  Hauling  Expense,  Admin.  Expense,  Selling  Expense  and  Factory  Expense. 
Hauling  Expense  is  a  factory  expense,  of  course,  and  all  expense  for  hauling 
may  be  thrown  into  Factory  Expense.    See  Petty  Cash  Book,  Chapter  VI. 


licM>KKKKIMX<;  AND  ACCOUNTING 


BOOKKEEPING  AND  ACCOUNTING  197 

Mar.  1.  192.  J.  C.  Noble,  II.  J.  Grover,  R.  J.  Miles  and  A.  C.  Collins  incor- 
porated the  Central  Foundry  Co.  under  the  laws  of  the  State  of  New 
Jersey  on  March  1,  192  ,  with  an  authorized  capital  of  ,$75,000,  divided 
into  750  shares  of  the  par  value  of  $100.  J.  C.  Nohle  subscribed  for 
250  shares  at  par,  H.  J.  Grover  subscribed  for  170  shares  at  par,  R.  J. 
Miles  subscribed  for  100  shares  at  par,  and  A.  C.  Collins  subscribed  for 
75  shares  at  par.  J.  C.  Noble  owned  a  plot  of  ground  on  which  is 
located  a  factory  building,  which  he  has  transferred  to  the  corpora- 
tion at  an  agreed  valuation  of  $15,000  for  the  building  and  $5,000  for 
the  land,  to  apply  on  his  subscription,  and  has  paid  the  remainder  of 
his  subscription  $5,000  in  cash.  II.  J.  Grover  has  transferred  by  bill  of 
sale  to  the  corporation,  suitable  machinery  at  an  agreed  valuation  of 
$12,000  to  apply  on  his  subscription,  and  has  paid  the  remainder,  $5,000, 
in  cash.  R.  J.  Miles  and  A.  C.  Collins  have  paid  their  subscriptions  in 
full  in  cash. 

The  incorporators  have  agreed  to  allow  E.  J.  Miner  to  subscribe 
for  60  shares  at  $125  a  share,  and  C.  M.  Senter,  60  shares  at  $125  a 
share,  for  which  they  have  subscribed  and  paid  in  cash. 

Prepare  the  opening  entries  in  the  Journal  and  enter  the  Cash, 
$42,500.  as  a  deposit  on  a  new  page  in  the  bank  pass  book.  This  pass 
book  may  or  may  not  be  kept.  Keeping  it  would  perhaps  give  a  bet- 
ter idea  of  the  use  of  the  bank  columns  in  the  Cash  Book,  if  the  de- 
posits are  entered  on  the  left  hand  page,  and  the  checks  entered  on 
the  opposite  page  and  balanced  whenever  the  cash  is  balanced.  The 
Pass  Book,  the  Cash  Book  and  the  Bank  columns  of  the  Cash  Book 
should  all  agree.  Check  the  cash  item  in  the  opening  entry  and  enter 
the  $42,500  on  the  debit  side  of  the  Cash  book  and  check  it  there. 
1.  Paid  cash  to  Davis  Office  Supply  Co.  for  12  Desks  @  $115,  25  Chairs 
net,  8  Crucibles  @  $400  each  on  account.  Bought  of  Akron  Tool  Co.. 
Akron,  Ohio,  miscellaneous  tools  for  $1,250,  on  account.  30  days. 
Bought  of  Acme  Boiler  Works,  Canton,  Ohio,  6  Boilers  @  $1,125  each, 
on  account,  30  days.  Bought  of  Federal  Truck  Co.,  Buffalo,  N.  Y.. 
3  Two-ton  Trucks  @  $1,750  each,  (Hauling  Equipment),  on  account, 
30  days. 

Note:  These  purchases  are  not  entered  in  the  Purchases  Book 
Only  purchases  of  raw  material  are  entered  in  the  Purchases  Book. 
Enter  the  above  purchases  in  the  Journal  and  the  amounts  in  the  Gen- 
eral column.  The  above  accounts  must  all  go  in  the  General  Ledger. 
Concerns  from  whom  property  is  bought  should  not  be  mixed  in  the 
Purchases  Ledger  with  the  accounts  of  concerns  from  whom  raw 
material  is  bought,  hence,  the  amounts  owed  to  these  concerns  for 
property  bought  is  not  placed  in  any  Accounts  Payable  column  in 
any  book. 

1.  Bought  of  Pittsburgh  Manufacturing  Co.,  Pittsburgh,  Pa.,  30  days 
@  $8.50,  4  Office  Rugs  @  $125,  3  Filing  Cases  @  $75,  4  Typewriters  @ 
$95,  4  Typewriter  Desks  and  Chairs  @  $45.  Paid  cash  to  Brown  Sta- 
tionery Co.  $187.35  for  blank  books  and  office  stationery.  (Cash  Book. 
Office  Equipment  and  Administrative  Expense.) 

1.  Bought  of  Ames  Coal  &  Coke  Co..  Chicago,  111.,  185  tons  Egg  <  'oal  @ 
$4.75,  and  125  tons  Coke  @  $8.05,  Invoice  No.  1,  3/15,  n  '60.  Boughl 
of  Sinclair  Oil  Co.,  Detroit.  Mich.,  5,625  gal.  Fuel  Oil  @  13i/oC. 
Invoice  No.  2,  3/15,  n/60.  Bought  of  The  Chicago  Metal  Co.,  Chicago. 
111..  375  Pigs  of  Iron  (100  lbs.  each.  Ton,  2000  lbs.)  @  $27.5(1  per  ton. 
and  15,625  lbs.  Zinc  @  18c,  Invoice  No.  3,  3/15,  n/60.    Bought  of  Union 


198  BOOKKEEPING  AND  A \TI\<; 

Sand  Co.,  s'i  tons  Sand  (g  $2.75  per  ton,  Invoice  No.  1.  3  15,  a  60. 
Bought  of  Western  Smelting  I  to.,  Moline,  111..  12,645  lbs.  I  topper  (g  I8e, 
Invoice  No.  5,  3  15,  □  60.  Boughl  of  Walker  Hies..  Toledo,  Ohio,  2,125 
lbs.  Phosphorus  (§  37c,  [nvoice  No.  6,  3  1~>.  n  60. 
.Alar.  1.  It  has  been  decided  to  keep  ool  more  than  $125  in  the  rash  drawer  for 
a  petty  rash  fund,  from  which  to  pay  petty  expenses.  Sel  up  the  Petty 
(ash  account  and  open  the  Petty  ('ash  Book.  See  Petty  Cash  Bi 
I  llust  nil  ion  No.  61a. 

•-'.   Paid  for  Carbon  Paper,  $3.25,  Rubber  Bands,  $2.85.     Paid  for  win- 
dow cleaning  at  Factory  buildin      -i      0.       Faetorj    Expense.      Paid 
for  Oil,  $4.50,  and  Gasoline,  $11.25,  for  trucks.     (Hauling  Expense. 
Paid  For  Order  Books  for  salesmen,  $3.75.     (Selling  Expense.)     All 
from  the  petty  cash. 

2.  Gave  Pittsburgh  Manufacturing  Co.  a  90  day  note  for  $2,000  at  c, 
interest  on  account.  (General  Ledger  account.  Enter  in  General 
colui 

i'.  Sold  J.  L.  Sparks  &  Co.,  Akron,  Ohio,  5,275  lbs.  Iron  Castin 
15c,  and  L-,750  Ihs.  Sand  Blast  Castings  (§  22%c,  2  L0,  □  30.  Sold 
Hill  >.v  Met  anna.  <  lanton,  Ohio.  2,375  Ihs.  Phos.  Bronze  i  lastings  (5  4:_V. 
and  2,750  Ihs.  Brass  Castings  (a  :;7C.,..  2  10,  n  30.  Sold  Murch  Bi 
Canton,  Ohio,  for  cash  500  Ihs.  Brass  Castings  (§  ■'>''->■  and  375  Lbs. 
tron  Castiuus  ui  lor.  Muter  in  Sales  Hook  separately.  Check  the 
••ash  item  in  the  Sales  Book  and  enter  the  amount  in  the  Cash  Hook 
and  check  it  thei 

2.  Gave  A.mes  Coal  &  Coke  Co.  a  15  day  acceptance  for  $1,078.45  and 
a  check  for  $750,  which  pays  [nvoice,  $1,885  in  full,  deducting  ■'!'. 
discount.  Paid  Markham  Insurance  Agencj  $320  premium  on  pol- 
icy to  coyer  building  For  one  year  from  March  1.  1'aid  J.  B.  .Minn-  $375 
for   repairs  on   the  building. 

2.  Received  a  L0  day  acceptance  for  $1,822.80  iron;  J.  |.  sparks  & 
Co.  on  account,  in  Full  For  bill  of  March  1,  allowing  2  $  discount. 

t.  Received  $18.75  from  Brown  Stationery  Co.,  refund  on  bill  of  March 
1,  on  account  of  error.  Received  $21.35  from  J.  E.  .Miner  for  over- 
charge on  repair  bill  of  March  2. 

I.  Paid   Pittsburgh   Manufacturing  Co    $1,200  in  Full  of  account.     Paid 

Sinclair  Oil  Co.  $736 n  account  and  received  '■'■'.   discount  on  the 

[nvoice  of  March  1. 

1.  Received  a  memorandum  of  credit  for  $23.85  from  the  Chicago  Metal 
i  to.  For  error  in  weight  on  Invoice  No.  3,  and  Erom  the  Western  Smelt- 
ing Co.  for  $82.45  For  inferior  grade  of  material. 

I.  Paid  for  Postage  $12.50,  Post  cards  $1.75.  Paid  for  prepaid  express 
$9.95,  Parcel  post  $14.50  (selling  expense),  From  tin-  petty  rash  fund. 

I.  Paid  C.  P..  &  Q.  R.  R.  Co.  $192.50  for  freight  on  goods  purchased  on 
March  1.  Paid  Cooper  Bros.  $125  for  repairing  Boilers,  and  the  City 
Machine  Shop  $187.50  For  repairing  machinery. 

•I.  Boughl  of  New  Jersey  Zinc  Co.,  Pittsburgh,  Pa.,  1,500  Lbs.  Zinc  (q 

ltd_.c.  [nvoice  No.  7.  '■'<  l.">.  n  mi.     Moujrlit  of  Keys! Coal  Co..  Belle 

ville.  III..  4l'  tons  Coal  (3  $5.25,  Invoice  No  8,  3  L5,  o  60.  Boughl  oi 
I  s.  Copper  Co.,  Cincinnati.  Ohio.  1,750  Lbs.  Copper  ("  PC.  [nvoici 
No.  9,  3   P..  , 

I  Sold  P.  Nelson  &  Co.,  Grand  Rapids,  Mich..  3,500  Lbs.  lion  Castings  (,; 
!  ic,  and  .".mi  lhv  Brass  Castings  (5  37%c,  2  10,  n  30.  Sold  Henning 
Pros.  Lansing,  Midi..  4,800  Ihs.  Sand  Blast  Castings  (5  •_"-"■.,•.  2  Id. 
n  ::u.     Sold  Seymour*  Peck.  Akron, Ohio,  2,800  Ihs.  Phos.  Bronze  Cast 

ings  {«    P-V.  2    ID.  n    30.     Sold   A.  C   Harris  &  Co..  Superior.   Wis..  2,300 


BOOKKEEPING   AND  ACCOUNTING  199 

lbs.  Brass  Castings  @  37*40,  2/10,  n/30.    Sold  Mussey  Bros,  i'or  cash 
575  lbs.  Brass  Castings  @  371/>c,  and  250  lbs.  Phos.  Bronze  Castings 
@  42c. 
Mar.    5.  Paid  for  repair  on  truck  $2.75.     Paid  for  stationery  for  use  in  fac- 
tory $6.25.     (Factory  Expense.)     All  paid  from  the  petty  cash  fund. 

5.  Gave  Hill  &  McCanna  credit  memorandum  for  $17.35  for  shortage  on 
bill  of  March  2.  and  allowed  P.  Nelson  &  Co.  $12.50  for  overcharge 
on  bill  of  March  4. 

6.  Received  $15.25  rebate  on  freight  bill  of  March  4,  on  account  of  over- 
weight charge. 

6.  Paid  payroll  for  the  week  as  follows:  Direct  Labor  as  per  payroll 
$1,125.  Office  Salaries  (bookkeeper  and  office  help)  $380,  Superin- 
tendence $125.  Engineers  and  Firemen  $100.  Hauling  Expense  (3 
drivers)  $75.     Total  payroll  check  $1,805. 

6.  Total,  in  very  small  pencil  figures,  the  checks  received  in  the  bank 
•  column  on  the  debit  side  of  the  Cash  Book  since  the  $42,500  was  en- 
tered in  the  pass  book  as  a  deposit.  Enter  this  amount  as  a  deposit  in 
the  pass  book.  Enter  each  check  paid  out  in  the  Bank  column  on  the 
credit  side  of  the  Cash  Book  on  the  right  hand  page  of  the  pass  book, 
separately.  Balance  the  pass  book.  Ascertain  the  cash  balance  and 
see  that  the  Cash  Book  balance,  the  pass  book  and  the  Bank  Columns 
agree.     Post  the  books  to  date. 

8.  Received  an  allowance  for  wrong  weight  $52.85  from  the  U.  S.  Cop- 
per Co.  on  Invoice  No.  9.  Received  an  allowance  for  overcharge 
$37.50  from  Walker  Bros,  on  Invoice  No.  6. 

8.  Gave  Western  Smelting  Co.  a  check  for  $2,127.84  on  account  and  re- 
ceived 3%  discount. 

8.  The  petty  cash  statement  from  the  petty  cash  fund  shows  the  follow- 
ing payments:  Hauling  Expense  $18.50,  Administrative  Expense 
$20.35,  Selling  Expense  $28,  Factory  Expense  $19.50.  Gave  a  check 
for  the  total  of  these  items  to  restore  the  petty  cash  fund.  Balance 
the  Petty  Cash  Book,  and  debit  these  expenses  on  the  credit  side  of 
the  Cash  Book. 

8.  Purchased  of  Ames  Coal  &  Coke  Co.  75  tons  Egg  Coal  @  $4.75.  and 
45  tons  Coke  @  $7.25,  Invoice  No.  10,  3/15,  n/60.  Purchased  of  Sin- 
clair Oil  Co.  3,750  gal.  Fuel  Oil  @  12y2c,  Invoice  No.  11,  3/15,  n/60. 
Purchased  of  Union  Sand  Co.  85  tons  Sand  @  $2.35,  Invoice  No.  12. 
3  15,  ii  (in.  Purchased  of  the  Mineral  Supply  Co.,  Detroit,  Mich.,  570 
pigs  Iron  (100  lbs.)  (5  $29.50  per  ton,  and  2.250  lbs.  Phosphorus  (a)  28c, 
Invoice  No.  13,  3/15,  n/60.  Purchased  of  New  Jersey  Zinc  Co.  12.425 
lbs.  Zinc  @  18c,  Invoice  No.  14,  3/15,  n/60.  Purchased  of  U.  S.  (Nip- 
per Co.  5,250  lbs.  Copper  @  19c,  Invoice  No.  15,  3/15,  n/60. 

8.  Sold  Spencer  Bros.,  York,  Pa.,  2,750  lbs.  Iron  Castings  @  15c,  and 
1,625  lbs.  Sand  Blast  Castings  @  22c,  2/10,  n/30.  Sold  J.  A.  Granger, 
Louisville,  Ky.,  1,375  lbs.  Brass  Castings  @  371/;C,  and  1,175  lbs.  Phos. 
Bronze  Castings  @  42c,  2/10,  n/30.  Sold  J.  Curtis  &  Co.,  Detroit, 
Mich.,  3,250  lbs.  Iron  Castings  @  15c,  and  1,275  lbs.  Sand  Blast  Cast- 
ings @  22c,  2/10,  n/30.  Sold  .Johnson  Bros,  for  cash  875  lbs.  Brass 
Castings  @  371/>c  and  675  lbs.  Phos.  Bronze  Castings  @  42c. 

!).  Gave  New  Jersey  Zinc  Co.  a  check  for  $240.07  in  full  for  invoice  of 
March  4  deducting  3',;  discount.  Gave  them  a  15  day  acceptance 
for  $2,169.40  in  full  for  Invoice  of  March  8  and  received  3%  discount 

9.  Sold  J.  White  &  Co.,  South  Bend,  Ind.,  3.375  lbs.  Iron  Castings  @  15c 
and  1.125  lbs.  Phos.  Bronze  Castings  @  42c.  2/15.  n  30.  Sold  .las. 
Doak  &  Co.,  Gary,  Ind.,  1,675  lbs.  Sand  Blast  Castings  @  22c  and  1,435 


200  BOOKKEEPING  AND  ACCOUNTING 

lbs.  Brass  Castings  @  37%c,  2  I5,n  30.    Sold  H.  A.  James  &  Co.,  Ham 
mond,  bad.,  2,450  lbs.  [ron  Castings  (§   15c,  and  875  lbs.  Phos.  Bronze 
Castings  (§  42c,  2  15,  d  30.    Sold  Davis  Bros,  for  cash  l.iT.O  lbs.  Saml 
Blast  Castings  (§  22c,  and  575  lbs.  rims.  Bronze  Castings  @  42c. 
.Mar.    9.  Allowed  Benning  Bros,  claim  for  shortage  of  $32.50  on  bill  of  .Mar.  4. 
Allow rd  A.  C.  Harris  &  <  '<>  $19.75  for  defective  castings  on  bill  of  Mar. 
1.    Received  a  check  for  $686.00  from  P.  Nelson  &  Co.,  and  allowed  2'  I 
discount.     Paid  Akron  Tool  Co.  *1.-5h  in  lull  of  account,     (Ceneral 
Ledger  account.     Enter  in  the  General  column. 

9.  Received  an  allowance  from  Keystone  Coal  Co.  for  short  weight, 
$18.75,  from  Mineral  Supply  Co.  for  error  in  invoice  No.  13,  $25. 

!>.  Received  15  day  acceptance  from  J.  A.  Granger  for  $988.95  and  al- 
lowed l"  ,  discount.  Received  a  check  for  $754.60  from  spencer  Bros. 
on  account  and  allowed  -'.  discount. 

9.  Paid  for  stationery  for  Factorj  $8  75, 1  Irder  Books  for  salesmen  $^2.50, 
Postage  for  office  use  $15,  Letterheads  and  Envelopes  for  office  use 
$32.50,  extra  helper  on  truck  $8.50.  All  from  petty  cash  fund. 
10.  Purchased  of  L.  A.  Kuhn  &  Bro.,  Jersey  <  lity,  X.  J.,  '■'•''>  pigs  Iron  (ion 
lbs.)  (5  $29.50  per  ton,  and  1.475  lbs.  Phosphorus  (§  28c,  Invoice  Nu. 
16,  3  15,  n  30.  Purchased  of  Union  Sand  Co.  75  tons  Sand  (n  $2.25, 
Invoice  No.  17.  3,  15,  o  60!  Purchased  of  Wilson  .Metal  Co.,  Boston, 
Mass..  3,750  lbs.  Copper  (g  19c,  and  3,575  lbs.  Zinc  (§  18c,  Invoice  No. 
18,  3  15,  n  60.  Purchased  of  Ames  Coal  &  Coke  Co.  65  tons  Egg  Coal 
Ui   $4.50,  and  35  tons  Coke  (,;   $6.75,   Invoice  No.  19,  3    15,  n/60. 

10.  Paid  Regan  Printing  Co  $387.50  for  printing  advertising  booklets. 
(Selling    Expense.)      Paid   Acme    Boiler   Works   $1,750   on   account. 

'ieneral  column. i     Paid  U.  S.  Copper  Co.  $824.16  on  account  and  re- 
ceived :i',  discount  on  balance  of  March  4. 

11.  Sold  Atlas  Sale-  Co.,  Vonkers.  \.  Y..  4,650  lbs.  Iron  Castings  ("  15c, 
and  3,577)  lb-.  ISrass  Castings  (a  M7C.e.  L'  15.  n  INI.  Sold  M.  Driscoll  & 
Co.,  Philadelphia,  Pa.,  3,725  lbs.  Sand  Blasl  Castings  (§  22c,  and  2,735 
lbs.  Phos.  Bronze  Castings  (5  12c,  2  15.  n  30.  Sold  Bill  &  McCanna 
t,875  lbs.  Inm  Castings  (§  L5c,  and  3,785  lbs.  lb-ass  Castings  («  ■171.,c, 
■2  15,  n  30.  Sold  Martin  &  Martin  for  cash  2^875  lbs.  Sand  Blasl 
Castings  (g  22c,  and  1,895  lbs.  Phos.  Bronze  Castings  (5  42c. 

11.  Paid  extra  helpers  for  hauling  $15.75,  Office  Supplies  $5.25,  Form 
Sales  Letters  $12.50  (Selling  Expense),  extra  help  for  cleaning  Fac 
tory  $13.50,  from  petty  cash  fund. 

12.  Received  a  check  for  $1,026.55  from  Benning  Bros,  and  allowed  them 
L"  ,    discount. 

12.  Received  $1,970.58  from  Hill  &  McCanna,  which  pays  bill  of  Mar.  2 
in  full,  allowing  -' ,  discount.  Received  $1,920.80  from  J.  L.  Sparks 
&  ('o.  to  pay  their  acceptance  of  March  2,  due  today. 

1l'.  Paid  for  Stamped  Envelopes  $110,  and  paid  Jones  Bros.  $87.25  for 
printing  office  stationery.  (Administrative  Expense.)  Paid  Federal 
Truck  Co.  $2,500  on  account.    (General  column.) 

12.  Purchased  of  Sinclair  oil  Co.  8,525  gal.  Fuel  Oil  (§  Il'Cc.  [nvoice  No. 
20,3  15.  ii  60.  Purchased  of  Chicago  Metal  Co.  750  pigs  of  Iron  (100 
III-,  in  $27  per  ton,  and  5,750  lbs.  Phosphorus  (§  29c,  Invoice  No.  21, 
3/15.  n  60.  Purchased  of  Union  Sand  Co.  125  tons  Sand  (§  $2.25  per 
ton,  Invoice  No.  22,  3  15,  n  60.  Purchased  of  Western  Smelting  Co. 
9,895  lbs.  Copper  (g  L9c,  and,  13,428  lbs.  Zinc  (§  18c,  [nvoice  No.  23, 
3  1-5.  n  60.  Purchased  of  Keystone  Coal  Co..  1S5  ions  Kl-i:  Coal  {n 
$4.75,  and  135  tons  Coke  <§  $6.25,  Invoice  No.  24,  3,  15;  n/60. 


BOOKKEEPING  AND  ACCOUNTING  201 

Mar.  13.  Paid  payroll  for  the  week  as  follows :  Direct  Labor  as  per  payroll 
$2,375,  Office  Salaries  (office  help,  Administrative  Expense)  $47"). 
Superintendence  $125,  Engineers  and  Firemen  $100,  Truck  drivers 
(Hauling  Expense)  $75.  Total  payroll  check  $3,150. 
13.  Paid  McGuire  &  Orr  $280  for  rent  of  Warehouse  for  one  month,  March 
1  to  April  1.  Received  $1,152.48  from  Seymour  &  Peck  on  account 
and  allowed  2%  discount.  Received  $825.89  from  A.  C.  Harris  &  Co. 
on  account  and  allowed  2%  discount. 
15.  Paid  Salesmen's  Salaries  for  two  weeks  to  March  13,  $300.  three  sales- 
men at  $50  a  week.  Received  $11.25  refund  from  Jones  Bros,  on  their 
bill  for  office  supplies  of  March  12. 

15.  Allowed  J.  Curtis  &  Co.  $28.50  for  shortage  on  bill  of  March  8.  Al- 
lowed Jas.  Doak  &  Co.  $37.25  for  defective  castings.  Allowed  .). 
White  &  Co.  $32.50  for  goods  returned  from  bill  of  March  8. 

16.  Gave  Wilson  Metal  Co.  a  15  day  acceptance,  dated  March  10,  for 
$1,315.32  on  account  and  received  3%  discount  on  $1,356,  Invoice  of 
March  10. 

16.  Purchased  of  Mineral  Supply  Co.  565  pigs  of  Iron  (100  lbs.)  @  $27.50 
per  ton,  and  6.750  lbs.  Copper  @  19c,  Invoice  No.  25,  3/15,  n/60.  Pur- 
chased of  New  Jersey  Zinc  Co.  12,895  lbs.  Zinc  @  18c,  Invoice  No.  26, 
3  15,  n  '60.  Purchased  of  Chicago  Metal  Co.  625  pigs  of  Iron  (100  lbs.) 
@  $27.50  per  ton,  and  6,350  lbs.  Phosphorus  @  29c,  Invoice  No.  27. 
3/15,  n/60.  Purchased  of  Union  Sand  Co.  175  tons  Sand  @  $2.35 
per  ton,  Invoice  No.  28,  3/15,  n/60. 

16.  Paid  Union  Sand  Co.  $213.40  and  received  3',  discount  on  Invoice  of 
March  1.  Paid  Walker  Bros.  $726.29,  and  received  '3%  discount  on 
balance  of  Invoice  of  March  1. 

17.  The  statement  of  petty  cash  expenses  shows  the  following  payments: 
Hauling  Expense  $24.25,  Administrative  Expense  $52.75,  Selling  Ex- 
pense $25,  Factory  Expense  $22.50.  Gave  a  check  for  the  total  of  these 
expenses  to  restore  petty  cash  fund.  Balance  the  Petty  Cash  Book, 
and  ascertain  the  Cash  Balance.  Enter  as  a  deposit  the  total  of  checks 
received  since  the  last  deposit  as  shown  by  the  Bank  column.  Enter 
all  checks  paid  out  in  the  Pass  Book,  and  see  that  the  cash  balance,  the 
Bank  columns  and  the  Bank  Pass  Book  agree.    Post  the  books  to  date. 

17.  Gave  Ames  Coal  &  Coke  Co.  a  check  for  $1,078.45  to  pay  our  acceptance 
of  March  2,  due  today.  Paid  J.  B.  Norton  $187.50  for  carpenter  work 
in  warehouse.  (Warehouse  Expense.)  Paid  Bradner  Smith  $275.80 
for  sundry  supplies  for  the  factory.     (Factory  Expense.) 

17.  Paid  Ames  Coal  &  Coke  Co.  $662.02  on  account  and  received  3%  dis- 
count on  Invoice  of  March  S,  $682.50. 

Note :  Transfer  the  Cash  Book  to  new  pages  whether  the  present 
pages  are  entirely  filled  or  not.  The  next  two  pages  will  be  sufficient. 
Rule  single  and  double  red  ink  lines  across  the  two  pages  exactly 
opposite  and  foot  all  the  columns  and  carry  the  footings  to  the  top 
of  the  new  pages.  The  Cash  Book  is  not  formally  balanced  and  ruled 
until  the  end  of  the  month 

18.  Sold  J.  L.  Sparks  &  Co.  6,438  lbs.  Iron  Castings  @  15c,  and  7,652  lbs. 
Brass  Castings  @  37y2c,  2/15,  n  30.  Sold  Hill  &  McCanna  8,796  lbs. 
Sand  Blast  Castings  @  22c,  and  6,385  lbs.  Phos.  Bronze  Castings  @ 
42c,  2/15,  n/60.  Sold  Henning  Bros.  5,985  lbs.  Iron  Castings  @  15c, 
and  4.875  lbs.  Brass  Castings  @  37V2c,  2/15,  n/60. 

18.  Paid  from  the  petty  cash  fund  :  Rubber  Bands  $2.45,  Carbon  Paper 
$3.50.     Oil  $5.85  and  Gasoline  for  trucks  $18.75.     Prepaid  Express 


202  BOOKKEEPING  AND  ACCOUNTING 

on  castings  $17.25.     (Selling  Expense.)     Window  cleaning  at  Factory 
$12.50. 
Mar.  18.  Paid  Keystone  Coal  Co.  $195.70  in  full  for  Invoice  of  March  4.  $220.50, 
deducting  3'  I  discount  on  the  balance  after  the  allowance  of  March  9. 

!>' ived  $724.71  from  .1.  Curtis  &  Co.  on  accounl  ami  allowed  2\ 

discount. 

ID.  Paid  C  &  A.  R.  I;  l  o  -  189.85  for  freight  on  four  cars  of  material 
bought  March  8.  Paid  Acme  Boiler  Works  $2,500  on  account. 
Received  $2,107.62  from  Mill  &  McCanna  mi  accounl  ami  allowed  2', 
discount  on  lull  of  March  1 1. 

111.  Paid  Central  Phone  Co.  $375  for  advertising  space  for  on.'  year  from 
March  1,  in  Phone  Book.  I  Selling  Expense.  <  rave  Chicago  Metal  Co. 
a  t;n  day  note  at  6« .   tor  $3,304.28  on  account. 

20.  Purchased  of  Amos  Coal  &  Coke  Co  225  tons  Egg  Coal  (5  $4.50,  and 
17.".  ions  Coke  at  $5.25,  Invoice  No.  29.  3  L5,  n  60.  Purchased  of  Sin- 
clair Oil  Co.  9,485  gal.  Fuel  Oil  (§  12c,  Invoice  No.  30,  3   15,  n  tin. 

20.  Paid  payroll  for  the  work  as  follows:  Direct  Labor  as  per  payroll 
$2,400,  Office  Salaries  (Office  help  $500,  Superintendence  $180,  Engi- 
neers ami  Firemen  $125,  Truck  Drivers  $75.  Total  payroll  check 
*:!,280. 

20.  Allowed  Hill  &  .Met 'anna  $74.75  for  shortage  on  bill  of  March  18. 
Allowed  .1.  L.  Sparks  &  Co.  $122.50  for  defective  '-asiin-s  ,,n  bill  of 
March  18.  Received  a  Co  day  note  for  $2,000  at  o\  from  Atlas  Sales 
Co.  on  account.  Received  a  60  day  note  for  $2,150  at  t'>' ,  from  Hill  & 
McCanna  on  account. 

22.  Paid  from  petty  cash  fund:  Office  Supplies  $6.50,  Second  Sheets  $2.75. 
For  Stationery  for  Factory  $11.25.  For  extra  help  for  hauling  $5.85. 
For  Advertisement  in  the  Daily  News  $8.50. 

22.  Paid  Anne  Boiler  Works  $2,500  on  account.  Paid  Federal  Truck  Co. 
•$2,750  on  account. 

22.  Sold  M.  Driscoll  &  Co.  1,200  His.  Iron  Castings  (a   IV.  and  850  lbs.  Bl 
Castings  (§  37%c,  2  15,  n  30.     Sold  Atlas  Sales  Co.  750  lbs.  Sand  Blasl 
Castings  (§  22c,  and  560  lbs.  Phos.  Bronze  Castings  in    12c.  2   15,  n  30. 
Sold  II.  A.  James  &  Co.  650  lbs.  Iron  Castings  @  15c,  and  540  lbs.  Brass 
Castings  (§   37Vfcc,  2  15,  o  30.     Sold  .las.  Doak  &  Co.  850  lbs.  Sand 

Blast  Castings  (5  22c,  and  (175  lbs.  Phos.  Bronze  Castings  (r;  42e.  2  1  >. 
n  :S0.  Sold  .1.  White  &  Co.  950  lbs.  Iron  Castings  (§  15c,  and  1,150 
lbs.  Brass  Castings  <§  37%c,  2  15.  ,,  30.  Sold  for  cash  to  .Morris  & 
Co.  1.200  lbs.  Sand  Blast  Castings  (§  22c,  and  600  lbs.  Phos.  Bronze 
Castings  («    t2c, 

22.  Received  a  60  day  note  at  i;\  from  Henning  Pros,  for  $2,725.88  on  ac- 
count, in  full  for  invoice  of  March  18. 

2:1.  Paid  Sinclair  Oil  Co  $454.69  and  received  '■'•'■  discount.  Paid  Onion 
Sand  Co.  $193.76  on  account  and  received  '■'•',  discount.  Paid  !'.  S. 
Copper  Co.  $967.57  on  account  and  received  •>',  discount.  Paid  Min- 
eral Supply  Co.  $1,422.38  on  account  and  received  '■'<'■   discount. 

23.  Received  $927.32  from  .1.  White  &  Co.  on  account  ami  allowed  2', 
discount.  Received  $851.99  from  .lames  Doak  &  Co.  on  accounl  ami 
allowed  2' ,    discount. 

23.  Purchased  of  Walker  Pros.  7,560  lbs.  Copper  (5  19c,  Invoice  No.  31, 
:{  15.  n  30.  Purchased  of  Keystone  Coal  Co.  125  ions  Egg  Coal  (a 
$4.50.  and   95  tons  Coke   (§    $6.S0,   Invoice   No  I    15.   n   60       Pur 

chased  of  1'.  s.  Copper  Co.  8,540  lbs.  Copper  c    19c,  Invoice  No.  33, 


BOOKKEEPING  AND  ACCOUNTING  '203 

3/15,  n/60.  Purchased  of  L.  A.  Kulm  &  Bro.  750  pigs  of  iron  ( 100  lbs. ) 
@  $25  per  ton,  and  4,750  lbs.  Phosphorus  @  30c,  Invoice  No.  34,  3/15, 
n/60.  Purchased  of  Wilson  Metal  Co.  7,500  lbs.  Copper  @  20c,  and 
5,400  lbs.  Phosphorus  @  30c,  Invoice  No.  35,  3/15,  n/60.  Purchased 
of  Sinclair  Oil  Co.  3,750  gal.  Fuel  Oil  @  He,  Invoice  No.  36,  3/15,  n/60. 
Mar.  24.  Received  $720.30  from  II.  A.  James  &  Co.  on  account  and  allowed  2% 
discount.  Received  $998.95  from  J.  A.  Granger  to  pay  his  15  day 
acceptance,  due  today. 
24.  Paid  New  Jersey  Zinc  Co.  $2,169.40  for  our  15  day  acceptance  due 
today. 

24.  Paid  Salesmen's  Salaries  for  two  weeks  to  March  20,  $500.  (Selling 
Expense.) 

25.  Received  allowance  for  $38.90  from  Western  Smelting  Co.  for  short 
weight.  Received  allowance  for  $49.95  from  L.  A.  Kulm  &  Bro.  for 
overcharge  on  March  10.  Received  allowance  from  New  Jersey  Zinc 
Co.  $89.75  for  shortage. 

25.  Paid  Union  Sand  Co.  $163.69  on  account  and  received  3%  discount. 
Paid  L.  A.  Kulm  &  Bro.  $888.69  on  account  and  received  3%  discount. 
Paid  Ames  Coal  &  Coke  Co.  $512.89  on  account  and  received  3%  dis- 
count. 

26.  Received  $1,928.84  from  M.  Driscoll  &  Co.  on  account  and  allowed  2',' 
discount. 

26.  Paid  C.  B.  &  Q.  R.  R.  Co.  $348.75  for  freight  on  three  cars  of  material. 
Paid  R.  C.  Adams  &  Co.  $127.85  for  sundry  Warehouse  supplies.  Paid 
for  labor  at  Warehouse,  $58.60.     (Warehouse  Expense  $186.45.) 

26.  Sold  P.  Nelson  &  Co.  7,850  lbs.  Iron  Castings  @  15c  and  7,530  lbs.  Bras* 
Castings  @  37y2c,  2/15,  n/30.  Sold  Henning  Bros.  4,750  lbs.  Sand 
Blast  Castings  @  22c,  and  4,250  lbs.  Phos.  Bronze  Castings  @  42c,  2/15, 
n/60.  Sold  to  Sevmour  &  Peck  8,540  lbs.  Iron  Castings  @  15c.  and 
6,375  lbs.  Brass  Castings  @  37y2c,  2/15,  n/60.  Sold  A.  C.  Harris  & 
Co.  8,750  lbs.  Sand  Blast  Castings  @  22e,  and  5,750  lbs.  Phos.  Bronze 
Castings  @  42c,  2  15,  n/30.  Sold  Sims  Bros,  for  cash  3750  lbs.  Iron 
Castings  @  15c,  and  3,250  lbs.  Brass  Castings  @  37^0. 

27.  Paid  payroll  for  the  week  as  follows:  Direct  Labor  per  payroll, 
$2,750,  Office  Salaries  (office  help)  $565.  Superintendence  $180. 
Engineers  and  Firemen  $125.  Truck  Drivers  $75.  Total  payroll 
check  $3,695. 

27.  Paid  Sinclair  Oil  Co.  $1,033.56  on  account  and  received  3%  discount. 
Paid  Chicago  Metal  Co.  $2,599.60  on  account  and  received  3%  discount. 
Paid  Union  Sand  Co.  $272.78  on  account  and  received  3%  discount. 
Paid  Keystone  Coal  Co.  $1,670.82  on  account  and  received  3%  discount. 

29.  Allowed"  Atlas  Sales  Co.  $11.85  for  defective  castings.  Allowed  Den- 
ning Bros.  $27.65  for  shortage  on  bill  of  March  26. 

29.  Sold  Spencer  Bros.  3.250  lbs.  Sand  Blast  Castings  @  22c  and  2,750 
lbs.  Phos.  Bronze  Castings  @  42c,  2/15,  n/30.  Sold  to  J.  A.  Grange 
&  Co.  2,500  lbs.  Iron  Castings  @  15c,  and  3,000  lbs.  Brass  Castings  (5 
37i/.e,  2/15,  n/30.  Sold  J.  Curtis  &  Co.  2,800  lbs.  Sand  Blast  Castings 
@  22c,  and  2.000  lbs.  Phos.  Bronze  Castings  @  42c,  2  '15,  n/30.  Sold 
Jones  &  Smith  for  cash  2.000  lbs.  Iron  Castings  @  15c,  and  1,200  lbs. 
Brass  Castings  @  371/2c. 

30.  Paid  Salesmen's  salaries  to  March  27,  $250.  Paid  Officers'  salaries 
$700. 

31.  The  statement  of  petty  cash  expense  shows  the  following  payments: 
Hauling    Expense    $30.55.     Administrative    Expense    $15.20.     Selling 


204  BOOKKEEPING  AND  ACCOUNTING 

Expense  $25.75.  Factory  Expense  $23.75.  Gave  a  check  for  the  total 
of  these  payments  to  restore  the  petty  '-ash  fund. 
Mar. 31.  Balance  the  Petty  (ash  Book,  and  ascertain  the  cash  balance  follow- 
ing instructions  under  March  6.  Post  the  books  to  date  and  take  a 
Trial  Balance. 
31.  .Make  the  uecessarj  adjustments,  using  the  following  inventories,  and 
prepare  a  Pinal  Trial  I'.alance  before  closing.  Prepare  a  Profit  and 
Loss  Statement  and  Balance  Sheet,  and  close  the  books. 

Inventories : 

Materials  Inventory  March  -'51 : 

."ill  tons  San. I  (a  $2.75 $137.50 

270  tons  Coke  (§  $2.50 675.00 

.".(Mill  -al.  Oil  (n'S,- 400.00 

L25  tons  [ron  (§  $15 1,875.00 

7000  lbs.  /.in,-  (,,  l  k 980.00 

125  tons  <  !oal  (§  $5.25 656.25 

2000  lbs.  Phosphorus  (5  23e 4(10.00 

$5,183.75 

Materials  in  process  March  31 $     850.00 

Labor  in  process  March  31 325.00 

Finished  goods  March  31 18,175  50 

Insurance  expired 26. 67 

•     •  Interest  accrued  on  Notes  Receivable 20.89 

Unpaid  Office  Help 175.00 

Unpaid  Sales  Force 250.00 

Interest  accrued  on  Notes  Paj  able 13.28 

Office  Supplies  on  hand 175.00 

Advertising  matter  on   hand    22.">.<h> 

Advertising  Contract  paid  in  advance 343.75 

Depreciation  on  (  Mice  Equipmenl 287.7."> 

I  >epreciation  of  Hauling  Equipment 525.00 

Depreciation  on  Machinery 1,200.00 

Depreciation  on  Tools 125.00 

Depreciation  on  Crucibles 960.00 

Depreciation  on  Boilers 1,350.00 

I  depreciation  on  Buildings 375.00 

Reserve  for  Doubtful  Accounts .'.bii.OO 

Note:  In  preparing  the  Profit  and  Loss  Statement,  the  total  of  the  debit  of 
the  accounts:  Sand.  Coke,  Copper,  Oil,  Iron.  Zinc,  Coal  and  Phosphorus,  is 
the  Raw  .Material  Purchases,  and  may  be  represented  in  one  sum.  The  total 
of  the  credit  of  the  accounts:  Iron  Castings,  Sand  Blast  Castings,  Brass  Cast- 
ings,  and  Phosphorus  Bronze  Castings,  is  the  amount  of  Sales,  and  may  be  used 
in  the  Profit   and   Loss  Statement    in  one  sum.     The   purchases  accounts  may   be 

opened  in  the  Ledger  under  the  following  headings:  Purchases  Sand.  Pur- 
chases Coke,  Purchases  Copper,  Purchases  Oil,  Purchases  Iron.  Purchases  Zinc, 
Purchases  Coal,  Purchases  Phosphorus.  The  sales  accounts  may  be  opened  under 
the  headings:  Sales  Iron  Castings,  Sales  Sand  Blast  Castings,  Sales  Brass  Cast- 
ings, Sabs  Phosphorus  Bronze  Castings.    This  will  designate  the  purchases  and 

sales  more  definitely  than  to  use  the  names  as  they  appear  in  the  Purchases  Boob 
and    in    the    Sales    Look. 


BOOKKEEPING  AND  ACCOUNTING 


205 


SINGLE    ENTRY    BOOKKEEPING 

185.  In  Single  Entry  Bookkeeping,  accounts  arc  kept  with  persons  or  firms 
only.  Usually  only  a  Journal  and  Ledger  are  kept.  The  Ledger  is  never  in 
balance,  because  only  one  side  of  a  transaction  is  posted,  and  this  record  is  made 
only  when  the  account  of  a  person  or  firm  is  involved.  A  Cash  Book  may  be 
and  is  sometimes  kept,  but  it  is  only  for  the  purpose  of  recording  the  cash 
received  and  paid  out  in  order  to  ascertain  the  Cash  balance.  If  a  cash  trans- 
action affects  a  persona]  account,  it  is  entered  in  the  Journal  also,  and  posted 
from  the  Journal  to  the  debit  or  credit  of  the  personal  account. 

186.  The  following  transactions  and  the  Journal  Memoranda  of  the  transac- 
tions are  sufficient  to  show  the  method  of  single  entry  bookkeeping.  We  call  the 
record  "Journal  Memoranda,"  because  they  are  not  journal  entries,  as  only  one 
side  of  the  transaction  is  considered.  If  a  transaction  does  not  involve  a  per- 
sonal account,  no  entry  is  made  for  it,  unless  a  Cash  Book  is  kept,  and  then  the 
only  purpose  of  the  Cash  Book  entry  is  to  be  able  to  determine  the  cash  balance. 

January   1,    192 


12 


D.    P.   Mason,    Proprietor 
Began  business,    investing 


Cash 
Merchandise 


Central  Milling  Co . 


-5- 


Bought  on  acoount 

50  brls.  Flour  at  $8.50 


Central  Milling  Co. 


■15- 


Gave  them  our  30  day  note 
on  aooount. 


-20- 


23 


D.  L.  Pearson 


Sold  on  account: 

5  bx.  D-  Peaohes  at  $3.25 
10  bsk.  Grapes  at  $2.15 


■25- 


R.  M.  Johnson 


Cr. 

8000 

3500 

4500 

00 
00 

Cr. 

425 

Dr. 

150 

Dr. 

37 

16 

21 

25 
50 

Dr. 

79 

) 

25 

54 

00 
80 

00 


00 


00 


75 


80 


Sold  on  account: 

200  lbs.  G.  Sugar  at  .12  l/2 
8  sks.  G.  Flour  at  $6.85 

ILLUSTRATION   NO.    88.       SINGLE    ENTRY   JOURNAL 

The  above  is  the  single  entry  record  of  the  following : 
Jan.    1.  D.  P.  Mason,  Proprietor,  began  business  and  invested  Cash  $3,500  and 
Merchandise  $4,500. 
5.  Bought  of  Central  MiJling  Co.  50  brls.  Flour  @  $8.50  on  account. 


206  BOOKKEEPING   AND  ACCOUNTING 

Jan.  10.  Boughl  25  bu.  Earlj  Potatoe         -  1.50  for  cash. 

12.  Sold  1  brl.  Flour  $9.50,  8  bu.  Earlj  Potatoes  <q  £4-25,  for  cash. 

I  ■.  Gave  G  utral  Milling  Co.  a  30  day  note  for  $150,  on  account. 

20.  Sold  to  I).  L.  Pearson  5  bx.  I).  Peache        -     !5,  L0  bsk.  Grapes  <g  $2.15 

(ju  account. 
25.  Sold  to  R.  M.  JohnsoD  200  His.  G.  Sugar  (§  12%c,  8  sks.  G.  Flour 
35. 
Paid  clerk  hire  $45,  Plumbing  bill  $22.50,  and  Telephone  $7.50. 

187.  The  Cr.  and  Dr.  indicate  on  which  side  of  the  personal  account  the 
item  is  to  be  posted.  The  transactions  of  January  10,  12,  and  30  are  i 
recorded  because  they  arc  cash  transactions  and  they  do  nol  affect  any  personal 
account,  but  they  maj  l"'  entered  in  a  Cash  Book  so  as  to  ascertain  the  cash 
balance.  When  the  above  entries  are  posted,  onlj  the  proprietor's  aceounl  and 
the  persona]  accounts  will  appear  in  the  Ledger.  Thus  it  is  seen  why  the  Ledger 
is  never  in  balance,  in  single  entrj  bookkeeping.  The  posting  is  a  simple  matter 
and  it  is  unnecessary  to  show  it  here. 

Iss.  ri'h,.  purpose  here  is  nol  to  teach  single  entry  bookkeeping.     It  is  qoI 

uecessary,  fur  any  who  can  post,  can  keep  single  entry  books.     The  * 

thai  the  accountanl  is  often  called  upon  to  change  single  entry  1 bs  to  double 

entry  bookkeeping,  makes  it  accessary  to  show  the  procedure. 

189.  Changing  to  Double  Entry:     In  order  to  change  single  entry  boo! 
double  entry,  it  is  necessary  to  ascertain  the  value  of  all  property  nol  recorded 
in   the  books  and   use  this  inventory  or  appraisal  with  the  accounts  in  the 
Ledger  to  establish  the  equilibrium  or  balance.     The  following  problem  will  be 
a  sufficient  guide  in  making  the  change  to  double  entry. 

190.  On  June  30,  192  .  at  the  end  of  a  six  month  period,  the  single  entry 

books  I't'   1).  1'.   Mason  show  the  following  Ledger  accounts,  and  you  are  asked 

to  change  the  books  to  double  entry. 

I>.  1'.  Mason,  Proprietor I  io.OO 

•Customers: 

J.   1'.  Jessup $525.75 

A.  I..  Jennings 464.85 

I).  M.  Sims 498.50 

''    I..   Bughes 631.25 

I  reditors: 

Mas.. n  Bros.  A.  Co I.7s;.50 

.1.  I..  Priest  &  s,,ii 825  i 

B.  .1.  Peters  &  Co 1,350.00 

$2.1^0.:ia      $11,962.90 


191.  of  course,  the  Ledger  is  not  in  balance.     A  Trial  Balance  cannot  he 

taken  from  single  entry  1 ks.     In  the  period  from  January  1  to  June  30,  .Mr. 

Mason  maj   or  m;i\   not   have  made  a  profit,      lie  eannot  tell   from  his  books 

192.  The  tirst  step  is  to  ascertain  the  value  of  all  the  property  pertaining 
to  the  husiness  that  is  not  recorded  in  the  hooks,  and  prepare  a  Balance  Sheel 
or  statement  of  Assets  and  Liabilities.  .Mr.  Mason  ehes  you  the  following 
additional  information  in  aid  you  in  determining  his  present  capital  and  in 
changing  t  he  books  to  double  entry  : 

(ash  in  hank  $3,500.  Value  of  merchandise  on  hand  $7,964.50;  he  holds 
one  note  in  his  favor  from  C.  T.  Smith  &  Co.  for  $1,250  at  6'  ,  .  dated  March  I. 
and  due   A.UgUSl    I,  and   two  notes  in   his  favor  from  .lones  &   Anderson   for  $500 

each  at  6%,  dated  February  1  and  April  1,  and  due  August  1.     Office  Furniture 


BOOKKEEPING  AND  ACCOUNTING 


207 


$750.     lie  has  outstanding'  a  ninety  day  note  in  favor  of  Middleton  Grocer  Co. 
for  $2,500  at  (V/(  dated  June  1. 

Statement   of  D.   P.   Mason,    June  30,    192 


Assets: 

Cash 

Notes  Reoelvable 
Aooounts  Receivable 
Mdse. Inventory 
Offloe  Furniture 

3500 
2250 
2120 
7964 
750 

00 

00 
35 
50 
00 

Liabilities: 

Not es  Payable 
Aooounts  Payable 

D.  P.  Mason's 
Present  Capital 

£500 
3962 

10121 

00 
90 

95 

Total  Assets 

16584 

85 

16584 

85 

ILLUSTRATION  NO.  89.      D.   P.   MASON'S  BALANCE  SHEET 

D.  P.  Mason  "s  investment  January  1,  was  $8,000.  His  present  capital  is 
$10,121.95.  His  profit  for  the  six  months  is  $2,121.95  ($10,121.95  less  $8,000). 
The  next  step  is  to  credit  D.  P.  Mason  for  the  net  profit  for  the  six  months  by 
an  entry  in  single  entry  form: 

P.  P.  Mason,  Proprietor Cr.   $2,121.95 

To  credit  the  net  profit  for  the  six  months  period. 

After  this  entry  is  posted,  D.  P.  Mason's  account  will  conform  to  the  state- 
ment or  Balance  Sheet,  and  the  next  step  is  to  prepare  and  post  the  entry  to 
change  the  books  to  double  entry. 

July  1,    192 


Having  decided  to  ohange  the  books 

from  Single  Entry  to  Double  Entry,  the 

following  exhibits  the  present  condi- 

tion of  the  business: 

S 

Cash 

3500 

00 

16 

Notes  Receivable 

2250 

00 

V 

J,  p.  Jessup 

525 

75 

r 

A-  L.  Jennings 

464 

B5 

S 

D.  M.  Sims 

498 

bO 

V 

C.  L.  Hughes 

631 

25 

14 

Mdse.  Inventory 

7964 

bO 

9 

Office  Furniture 

760 

00 

17 

Notes  Payable 

2500 

00 

y 

Mason  Bros.  &  Co. 

1787 

50 

is 

J.  L.  Priest  &  Son 

825 

40 

R.  J.  Peters  &  Co. 

1350 

00 

S 

D.  P.  Mason,  Capital 

10121 

95 

Items  checked  are  already  In  the  Ledger 

exoept  Cash,  which  is  entered  In  the  Cs 

ish  Bo 

3k. 

ILLUSTRATION  NO.  80.   ENTRY  TO  CHANGE  TO  DOUBLE  ENTRY 


Note:  The  accrued  interest  on  Notes  Receivable  to  June  30,  $25.42,  and 
the  accrued  interest  on  Notes  Payable  to  June  30.  $20.08.  are  not  included  in 
the  Assets  and  Liabilities,  because  these  items  will  be  taken  care  of  when  the 
notes  are  paid.     Of  course,  this  would  affect  D.  P.  Mason's  net  profit  $5.34.  but 


lios  BOOKKEEPING  AND  ACCOUNTING 

as  there  is  no  other  interest  involved  than  D.  P.  Mason,  it  is  practical  to  allow 
this  matter  to  adjust  itself  when  the  notes  are  paid.  If  D.  P.  Mason  were  admit- 
ting a  partner,  it  would  be  a  different  matter,  Then  the  debil  balance  of 
[nten  st,  $5  34,  should  appear  in  the  assets. 

193.  When  the  items  nol  checked  are  posted,  the  Ledger  will  be  in  balance, 
and  the  books  are  ready  to  receive  the  business  to  be  recorded  by  the  double 
entry  method.  If  an  entirelj  n<  «  sel  of  books  were  to  be  used,  then  all  the 
items  in  the  above  entry,  including  those  checked  would  have  to  be  posted  in 
the  new  Ledger.  It'  there  were  a  large  number  of  customers  and  creditors  so 
thai  Accounts  Receivable  and  Accounts  Payable  would  be  used  in  this  opening 
entry  to  change  the  books,  then,  if  a  new  set  of  books  were  to  be  opened, 
Schedules  of  Accounts  Receivable  and  Accounts  Payable  should  be  entered  in 
the  Journal,  following  the  opening  entry,  and  posted  to  the  debit  of  customers' 
accounts  aud  the  credit  of  creditors'  accounts  in  the  n>-w  Ledger. 


CHAPTER  X 

COST  ACCOUNTING,  PART  I 

19L  The  purpose  of  the  following'  illustrations  and  problems  is  to  show 
how  to  determine  from  the  Trial  Balance  the  unit  eost  of  a  single  article  or  prod- 
uct, as  well  as  the  percentage  of  cost  based  upon  sales.  It  does  not  involve  a 
system  of  cost  accounts,  although  the  same  final  results  are  obtained  as  if  a 
system  of  cost  records  were  kept. 

195.  The  difference  is  that  determining  the  cost  from  the  results  of  the 
bookkeeping  at  the  end  of  a  period,  gives  the  information  as  to  costs,  too  late 
to  apply  any  remedy  to  reduce  expenses,  where  they  might  be  reduced ;  while 
a  system  of  cost  records  gives  the  necessary  information  from  week  to  week 
or  month  to  month,  so  that  remedies  may  be  immediately  applied  by  the 
management.  However,  even  where  a  system  of  cost  records  is  not  kept,  the 
information  that  can  be  ascertained,  from  the  Trial  Balance  and  the  supple- 
mentary facts,  is  very  valuable  for  future  comparisons  and  for  price  making. 

196.  In  order  to  ascertain  the  cost  per  unit,  (per  1,000  feet  of  lumber,  per 
barrel,  per  ton,  per  dozen,  per  hundred  or  for  a  single  machine)  only  the 
Profit  and  Loss  Statement  is  necessary  to  ascertain  the  unit  cost  and  per- 
centages of  sales,  as  shown  in  the  following  illustration,  however,  the  student 
is  asked  to  prepare  a  Balance  Sheet  and  prove  it  with  the  Profit  and  Loss 
Statement  in  order  to  verity  its  correctness. 

197.  The  forms  of  the  Balance  Sheet  and  Profit  and  Loss  Statement  are 
not  different  from  the  forms  of  such  statements  for  a  manufacturing  business, 
with  which  the  student  is  already  familiar.  If  this  problem  is  worked  out 
completely,  the  next  problem,  No.  19.  which  is  similar,  will  not  be  difficult. 

198.  While  the  usefulness  of  the  information  contained  in  the  percentages 
and  figures,  showing  the  unit  cost,  is  apparent,  in  the  two  problems  following, 
it  is  not  real  cost  accounting.  However,  where  a  system  of  factory  cost  records 
are  not  kept,  figuring  the  unit  cost  as  shown  in  these  statements  does  obtain,  at 
the  end  of  a  period,  the  unit  cost  that  would  be  shown  monthly  by  a  cost  system. 
When  the  solutions  at  the  end  of  the  Profit  and  Loss  Statement  are  studied  in 
connection  with  the  Profit  and  Loss  statement,  the  value  of  this  information 
will  be  seen.  In  a  milling  business,  where  a  cost  system  is  not  kept,  it  is  valu- 
able information  to  know,  at  the  end  of  a  period,  three  months,  six  months,  or 
a  year,  just  what  it  cost  to  produce  a  barrel  of  flour.  In  many  other  lines, 
where  a  complete  cost  system  is  not  maintained,  this  information,  as  to  the 
cost  of  the  unit,  is  valuable. 

199.  Problem  17.  The  Mead  Bicycle  Company,  a  corporation,  at  the  end 
of  the  year's  business,  December  31.  192  ,  desire  to  know  what  it  has  cost  them 
to  produce  a  single  bicycle,  that  is,  the  unit  cost  of  their  product.  The  following 
is  their  Trial  Balance,  taken  from  their  Ledger  on  December  31,  at  the  close  of 

209 


210 


BOOKKEEPING  AND  ACCOUNTING 


business.     They  had  on  hand  al  the  beginning  of  the  year,  January   1.  I.l'.'iO 
bicycles  inventoried  al  $35  each      Thej   have  sold  6,500  wheels  and  have  950 

bicycles  on  hand  at  the  end  of  t  he  j  ear. 


Trial  Balance,    L;ead  Bicycle   Co. 

Capital    Stook    

t'nsubsorlbed  Stook 

Surplus • 

Cash 

Rotes   Receivable      

Acoounts   Receivable 

Rotes   Payable    

Aooonnts   Payable      

Building    (Faotory)      

Uaohlnery    

Toole         

Oi'floe   Equipment 

Hauling  Equipment    , 

Sales        

Sales  Returns  and  Allowanoes   .  .  .  .  , 

Sales  Discount , 

Raw  Material,  Jan.  1   

Purchases  Raw  Materials  

Finished  Goods,  Jan.  1, 

(1,250  Bioyolee  at  $35)  

Freight  In , 

Purohases  Returns  and  Allowances   .  .  . 

Purohases  Bisoount   

Direct  Labor  

Fuel  and  tight 

Building  Repairs   

Maohinery  Repairs  

Tool  Repairs   

Paint    

Foremen's   Salary      

Electrlo   Power      

Taxes   on   Plant 

Insurance   on  Plant   and  Material    .    .    .    . 

Freight    Out ■   .    , 

Salesmen's   Salary    

Traveling  Expenses      

Advertising ' 

Agent's  Comr.lssion 

Branch  Expenses •.  .  , 

Office  Supplies  ...'........ 

Office  Salaries _•  < 

Director's  Fees  

Legal  Expenses   

Interest  and  Discount  

Collection  and  Exchange  


Dec.  31,  192 


250000 

00 

25000  00 

12500 

00 

57560  50 

63250  75 

125714  40 

14500 

00 

17525 

65 

65000  00 

63250  00 

5300  00 

2750  00 

5500  00 

563663 

35 

4750  85 

6432  50 

10264  50 

102407  00 

43750  00 

162  7  00 

3756 

50 

8121 

75 

92300  00 

6250  00 

450  00 

500  00 

60  00 

2646  00 

13600  00 

1650  0? 

500  00 

600  00 

2150  00 

4500  00 

3250  00 

1200  00 

67300  00 

53250  00 

1525  00 

10621  75 

500  00 

275  00 

1150  00 

450  00 

870087  £5 

670067 

25 

ILLUSTRATION    NO     91.      FIRST    TU1A1.    BALANCE 


I  ii  %  entories  I  lecember  31: 

Raw    Materials    $9,850 

Finished  Hue, Is 33,250 

Nine  hundred  and  fifty  Bicycles  invoiced  at  $35  each. 

Res.  for  Doubtful  accounts.... 

Res.  for  Dep.  on  Building 

Res.  for  Dep.  on  Machinery 

Eos.  for  Dep.  on  Tools 


BOOKKEEPING  AND  ACCOUNTING  211 

Profit  and  Loss  Statement,  Mead  Bicycle  Co.,  Dec.  31,  192 

Sales    $563,683.35 

Less  Sales  Returns  and  Allowances $4,750.85 

Less   Sales   Discounts 6,432.50         11,183.35 


Net  Sales  (6500  Bicycles  @  $85) $552,500.00 

Prime  Cost: 

Raw  Materials,  Jan.   1 $10,264.50 

Purchases  Raw  Material $102,407.00 

Less  Purchases  Returns  ami  Allowance  .  .  .     3,756.50         98,560.50 


Freight  In    1,S27.00 

Direct   Labor   92,300.00 


$203,042.00 
Less  Raw  Material  Inventory,   Dee.  31..  9,850.00 


Prime  Cost  ($31.16  each  fur  6,200  Wheels)  $193,192.00 

34.969    of  Sales. 

Production  Cost: 

Fuel  and  Light $8,250.00 

Building  Repairs 450.00 

Machinery  Repairs 500.00 

Tool  Repairs   60.00 

Paint   2.S4S.00 

Foremen  's  Salary 13,600.00 

Electric  Power   1,850.00 

Taxes  on  Plant 500.00 

Insurance  on  Plant  and  Machinery 600.00 

Res.  for  Dep.  on  Building ' 2,500.00 

Res.  for  Dep.  on  Machinery 5,500.00 

Res.  for  Dep.  on  Tools 2,650.00 

Factory  Overhead  (7.11%  of  Sales,  $6.34 

per  wheel   $39,308.00 

Manufacturing  Cost   (42%  of  Sales)    ($37.50  per  wheel — 

on  6,200  wheels) $232,500.00 

Add  Inventory  Finished  Goods,  Jan.  1 43,750.00 

$276,250.00 
Deduct   Invt.    Finished    Goods,    Dec    .".1     (Inventoried 

950  wheels  @  $35) 33,250.00 


Manufacturing  Cost  of  Goods  Sold  (44',   of  Sales) $243,000.00 

Gross  Profit  on  Sales $309,500.00 

Selling  Cost: 

'  Freight  Out   $2,150.00 

Salesmen  's  Salaries  4,500.00 

Traveling  Expenses  3,250.00 

Advertising 1,200.00 

Agents  Commission    87,300.00 

Branch  Expenses   53,250.00 

Selling  Cost  (27.44T  of  Sales) $151,650.00 

($23.33  each  on  6,500  wheels)  » 

Profit   on  Sales $157,850.00 

Administration   Cost: 

Office  Supplies $1,525.00 

Office  Salaries   10,821.75 

Director 's  Fees  500.00 

Legal  Expenses 275.00 

Cost  of  Administration  (  2.37< ,    of  Sales) $13,121.75 

Gross  Business  Profit,  carried   for'd $144,728.25 


212  BOOKKEEPING  AND  A.I  I  OUNTING 

i    Profit,    Brot    l'..r  .1 $144,728.25 

Other  Income: 

Purchases  Discount  (1.47%) i     21.75 

950.00 
Deductions  from  Income: 

Interest  from  Discount $1,150.00 

i  ion    and    Exchange 00 

Loss  on  I  loubt  i'"l  Accounts 5.00" 

Deductions      1.19'        —  ".00 

Net   Profit    (26.479    "!  s:''">' $14<;,:!u0.00 

($22.50  each  on  6,500  whi 

ILLTJSTBATION    NO     92       PROFIT    AND    LOSS    STATEMENT.       MANUFACTURING 

Note:  It  would  be  practical  to  leave  the  Inventory  Value  of  the  finished 
goods  until  the  actual  cost,  this  year,  of  manufacturing  a  wheel,  is  determined  in 
the  above  statement,  which  we  find  was  $37.50,  and  thru  inventory  the  number 
of  wheels  on  hand  al  the  end  of  the  year  at  this  actual  cost  price,  instead  of  in- 
ventorying the  950  wheels  on  hand  at  $35,  which  was  the  same  as  last  year's 
inventorj  pi  ce  This  would  make  $2.50  a  wheel  difference  in  inventorj  price  ol 
the  950  wheels,  and  would  affeel  the  profil  just  thai  amount.  The  studenl  is 
asked  to  carry  ou1  this  idea  in  t  lie  next  problem. 

200.  To  find  the  number  of  Machines  Produced: 

The  number  of  wheels  sold  during  the  year 6500 

The  number  of  wheels  on  hand  I  >ec.  31 ! 

Less  number  of  wheels  mi  hand  Jan.  1 1250 

Number  of  wheels  manufactured 6200 

Prime  ( lost  per  Wheel : 

Prime  cosl  as  per  statement $193,192.00 

Number  of  wheels  produced ti'JOo 

Prime  eosl  per  wheel 31.1t> 

($193,192  divided  by  6200) 

Selling  Price : 

If  the  profil  of  this  year  is  to  be  maintained  for  next  vear.  add  172.789! 
to  the  Prime  Cost.  172.78?!  of  $31.16  is  $53.84.  $31.16  plus  $53.84  is  $85,  the 
si  lling  price. 

To  find  Total  Unit  i  'est  : 

The  j i . - t  profil  for  the  year  is $]  16,250 

Net  sales  for  the  year $552,500 

Less  net  profil 146,250 

Total  cost  and  expenses  for  the  year $406,250 

Number  of  wheels  sold 

Final  cosl  per  wheel $62 

$406,250  divided  by  6500 

To  find  the  Ne1   Profil  on  a  Wheel: 

The  net  profil  for  the  year $146,250 

Total  number  sold 6500 

Profil   on  eaidi   wheel   is $22.50 

($146,250  divided  by  6500). 


BOOKKEEPING  AND  ACCOUNTING  213 

Percentage   Proof: 

Manufacturing  cost  of  goods  sold 44      %  of  sales 

Selling  Cost 27.44' ,  of  sales 

Administration  Cost 2.37%  of  sales 

Other  deductions 1.19%  of  sales 

Net    Profit 26.47%  of  sales 

101.47';;  of  sales 

Less  other  income 1.47%  of  sales 

Net  Sales .TOO      %  of  sales 

Note :  There  are  some  slight  discrepancies  on  account  of  dropping  decimals, 
but  these  discrepancies  have  offset  each  other  in  this  case.  Prepare  a  Balance 
Sheet  and  prove  it  with  the  foregoing  Profit  and  Loss  Statement 

PROBLEM  18.  ILLINOIS  COAL  MINING  CO.,  INCORPORATED 
201.  The  Illinois  Coal  Mining  Co.  was  incorporated  and  began  business 
January  1,  192  .  During  the  year  to  December  31.  192  ,  they  sold  65,000 
tons  of  coal  at  $2.20  per  ton,  at  the  mine.  From  the  following  Trial  Balance  taken 
from  their  Ledger,  find  the  Prime  Cost  per  ton.  the  "Cost  of  Mining"  per  ton. 
the  total  net  cost  per  ton,  and  the  net  profit.  To  do  this,  it  is  only  necessary 
to  prepare  a  Profit  and  Loss  Statement,  but  prepare  a  Balance  Sheet  also  and 
prove  it  with  the  Profit  and  Loss  Statement. 

Trial  Balance,  Illinois  Coal  Mining  Co.,  Incorporated 

Capital  Stock $150,000.00 

Cash   $23,750.00 

Notes  Receivable   9,925.00 

Accounts  Receivable   9,725.00 

Notes  Payable 12,000.00 

Accounts  Payable 10,500.00 

Buildings    27,500.00 

Land    160,000.00 

Machinery    22,500.00 

Construction    20,000.00 

Mortgage  Payable   40,000.00 

Labor 36,850.00 

Royalties  2,100.00 

Superintendence    9,750.00 

Machinery  Repairs 1,815.00 

Building   Repairs    1 ,635.00 

Oil    3,750.00 

Fuel 4,150.00 

Mine  Supplies   3,125.00 

Mine  Expenses   6,125.00 

Insurance  on  Mines  1,250.00 

Sales  of  Coal  143,000.00 

Selling  Commission    3,875.00 

Salesmen 's  Salaries   2,575.00 

Office  Salaries   1,600.00 

Office  Expenses 1,200.00 

Directors '    Fees    300.00 

Interest  on  Mortgage   2,000.00 

$355,500.00     $355,500.00 

The  inventory  of  coal  on  hand  is  3,000  tons.  Charge  off  10%  depreciation 
on  Buildings,  Machinery  and  Construction.  Royalty  is  the  price  paid  for  the 
use  of  patented  machinery.  Labor  and  Royalties  are  each  a  part  of  the  prime 
cost.  The  depreciation  is  a  part  of  the  Mining  Overhead.  When  the  Mining 
Cost  per  ton  is  ascertained,  then  the  value  of  the  3,000  tons  on  hand  can  be 
determined,  which,  when  deducted  from  the  total  Mining  Cost,  will  give  the 
cost  of  mining  the  whole  number  of  tons  sold.  This  problem  is  to  be  worked 
out  similar  to  problem   17. 


214  BOOKKEEPING  AND  ACCOUNTING 

Cost  Accounting,  Part  II. 

202.  Cosl  Accounting  to  be  effective  in  enabling  the  management  to  apply 
remedies  in  cutting  down  costs,  where  the  excess  cost,  waste  or  losl  motion  is 
apparent,  must  give  up-to-date  information  so  thai  any  lack  of  efficiency  or 
excessive  expense  may  be  discovered  within  a  month,  instead  of  a1  the  end  of 
a  period  of  three  months,  six  months,  or  a  year,  as  in  the  foregoing  problems. 

203.  Cosl   records  and   books  are  separate  from  the  general  bookkeeping. 

However,  the  closer  the  cosl  records  and  cosl  books  can  be  c< cted  with  and 

controlled  by  the  manufacturing  accounts  in  the  General  Ledger,  the  better  the 
results  thai  come  oul  of  the  cosl  system. 

204.  The  purpose  of  a  cosl  system  is  to  show  il sad   cosl  of  the  unit 

per  1,000,  per  hundred,  per  dozen,  per  barrel,  or  for  a  single  article  or  job) 

produced.  On  completion  of  a  eontracl  or  job,  a  comparison  of  the  results 
shown  by  the  cosl  records  with  the  estimate  made  when  the  job  or  eontracl  was 
accepted,  will  give  accurate  information  for  future  estimati 

205.  A  cosl  system  should  be  developed  in  connection  with  the  actual  op- 
eration of  the  particular  business  Eor  which  i1  is  intended,  and  planned  to 
economize  time  and  expense.  Personal  contact  and  actual  acquaintance  with 
everj   operation  is  necessary.    A  cumbersome  system  thai  requires  mure  time 

and  expense   to   keep   than   it   Would   save    for  the   business   is  about    as   good   as 

none,  so  the  expense  of  the  cost  system  must  be  considered  as  well  as  the  other 
costs. 

206.  A  system  may  be  devised  to  show  the  operating  costs  of  a  department, 
or  for  the  entire  plant  where  only  one  kind  of  goods  are  manufactured,  in- 
volving the  cost  of  materials,  cost  of  labor  and  the  expenses,  and  it  may  be 
planned  to  show  the  cosl  of  materials,  cosl  of  direct  or  productive  labor,  and 
the  c,,st  of  factory  expenses  (indireel  labor  and  expenses)  for  a  particular 
contract,  quantity,  job  or  other  unit.  In  any  ease,  one  of  the  main  objects  is  to 
finally  show  the  "Gross  profit"  on  the  "manufactured  goods  sold"  which  is 
the  differe ■  between  the  "manufacturing  cost  of  the  goods  sold"  and  the 

■'net    sales." 

l'h7  A  special  system  must  be  planned  lor  each  particular  business  Prob- 
ably no  two  plants  would  present  the  same  conditions.  It  is  not  possible  to 
devise  a  system  of  cost  accounting  which  will  apply  to  establishments  in  dif- 
ferent lines  of  manufacturing.  One  factory  works  to  produce  a  single  form  of 
some  staple  article  or  commodity,  another  produces  a  special  kind  of  machine, 
each  involving  a  series  of  operations  peculiar  to  that  particular  factory.  No 
general  set  forms  can  be  designed  which  would  be  suitable  for  all  of  them.  It 
is  1 1 . .  1  [possible  to  devise  forms  for  ascertaining  the  costs  'hat  would  apply  in 
detail  to  factories  in  the  same  line,  on  accounl  of  the  different  conditions  and 
surrounding  circumstances.  Intimate  acquaintance  with  the  equipment,  op- 
erations and  conditions  are  absolutely  necessary,  which  means  lirst  hand  in- 
formation secured  by  personal  contad  with  the  actual  facts. 

208.  Naturally,  the  larger  and  more  complicated  the  business,  the  more 
specific  information  is  required,  and  the  finer  the  distinctions  and  calculations 
tiiat  are  necessary.  Cosl  Accounting  is  a  tremendous  subject.  It  is  not  at- 
tempted here  to  much  more  than  introduce  the  subject. 

209.  In  a  plant  of  ordinary  size,  or  in  a  plaid  just  starting,  it  is  not  so  dif- 
ficult to  devise  a  system  of  cost  records  that  will  secure  the  necessary  in- 
formation, if  working  in  connection  with  the  actual  operations,  as  it  would  seem, 

■  bile  studying  the  subject  in  the  abstract. 


BOOKKEEPING  AND  ACCOUNTING  215 

210.  Factories  may  be  classified  as  two  kinds:  One  kind  produces  great 
numbers  of  a  standard  article,  such  as  a  motor,  bicycle  or  a  fountain  pen.  The 
other  turns  out  goods  upon  the  order  of  customers,  which  orders  vary  so  much 
that  it  is  seldom  that  any  two  orders  are  the  same.  In  either  case,  the  factory 
is  usually  departmentized  and  each  department  is  organized  to  perform  some 
part  of  the  series  of  operations  necessary  to  production. 

211.  A  printing  plant  is  a  good  example  of  the  latter  kind  of  factory. 
Orders  are  taken  from  customers.  Estimates  are  made  upon  which  the  order 
is  accepted.  A  production  order  is  given  by  the  managing  head.  A  production 
order  form  may  be  devised  which  can  be  tilled  out  readily  and  which  will  con- 
tain all  necessary  directions  for  the  different  departments  which  are  to  co- 
operate in  tilling  the  order.  The  production  order  may  be  made  in  any  num- 
ber required,  so  that  a  copy  may  go  to  each  department  interested,  and  one 
copy  can  be  used  for  making  a  summary  of  the  cost  of  the  job  as  the  necessary 
information  develops.  The  production  order  is  given  a  serial  number,  and 
this  number  must  appear  on  all  tickets,  requisition  orders,  etc.,  connected  with 
this  particular  job. 

212.  Cost  accounting  follows  the  materials  through  the  factory,  and  every 
time  the  material  moves  it  costs  money  and  a  record  must  be  made  of  the 
facts,  and  also  of  the  incidental  facts  or  indirect  expense.  Forms  must  be  de- 
signed to  ascertain  the  following  necessary  facts : 

First:  The  exact  cost  of  materials  used,  and  the  quantity  and  cost  for  each 
job  or  piece. 

Second:  Direct  Labor  cost  must  be  ascertained,  and  the  cost  records  must 
show  how  much  of  the  Direct  Labor  cost  should  be  charged  to  each  job,  con- 
tract, piece  or  quantity. 

Note:  Direct  Labor  is  the  wages  of  those  employed  directly  on  the  production  of  the 
product  of  the  factory.  Indirect  Labor  is  the  wages  of  those  employed  in  and  about  the 
factory,  but  not  on  the  work  of  actual  production. 

Third:  Indirect  Expense  (Factory  Expense,  Burden  or  Overhead)  must  be 
ascertained  and  apportioned,  that  is.  charged  to  each  job  or  other  unit  on  some 
equitable  basis. 

Note:  Indirect  Expenses  are  items  of  expense  which  cannot  be  separated  and  eharged 
lo  each  job  or  contract  as  can  the  cost  of  Direct  Labor  and  Materials. 

Fourth:  If  it  is  desired  that  the  cost  system  shall  show  the  final  cost  of  the 
unit,  it  is  necessary  to  ascertain  the  selling  and  administrative  expense  and  any 
other  costs,  and  apportion  them  to  each  unit  on  some  equitable  basis. 

213.  The  summing  up  of  the  results  is  simple  enough,  after  all  the  facts  are 
ascertained  by  the  various  cost  records,  to  find  the  unit  cost  of  a  job,  piece  or 
contract. 

214.  Certain  Manufacturing  Accounts  are  kept  in  the  General  Ledger  to 
control  the  cost  system,  similar  to  the  manner  in  which  Accounts  Receivable 
controls  the  Sales  Ledger  and  Accounts  Payable  controls  the  Purchases  Ledger 
or  <  Yeditors'  Ledger. 

215.  Materials  must  be  purchased,  and  a  purchase  order  form  is  designed. 
Materials  purchased  are  received  with  invoice  and  recorded  in  the  Purchases 
Book,  and  finally  debited  to  Raw  Materials  account  in  the  General  Ledger. 

216.  All  materials  purchased  for  manufacturing  purposes  is  received  in  store 
and  entered  in  the  Stores  Record  Book  or  Stores  Ledger.    The  Stores  Record 


516 


BOOKKEEPING  AND  ACCOUNTING 


shows  the  date  the  materials  are  received,  the  quantity,  the  price,  and  the 
cost,  in  the  lirst  section  of  the  following  form.  In  the  nexl  section,  it  shows  the 
date  the  materials  are  issued,  the  Requisition  No.,  the  quantity,  the  price  and 
the  cost.  The  last  section  shows  the  balance  in  Stores  and  the  cosl  or  value. 
Materials  are  issued  from  stores  on  requisition  only,  by  the  Storekeeper. 


STORES  RECORD  BOOK 

I  description    

I  lave  on  band  uo  more  than 

<  Irder  when  supply  falls  below 


R  a  c   e    1 

Tad 

1   0   a   u   a 

d 

Bala 

n  o   6 

Data 

Order 

no. 

Quant 1 ty 

Prioe 

Coat 

Data 

Raq 
no. 

Quant lty 

Prloa 

Coa: 

Quantity 

Coat 

Jan.      1 

!n»ty . 

6000   It  a 

.60 

3000   OC 

Jan.    26 

36 

40000  lba 

60 

20000  00 

16000  lba 

6000  00 

Jan.   16 

12 

60000      ' 

60 

26000  00 

Kay     20 

36 

40000 

60 

20000  00 

26000       - 

13OO0  00 

Uay      16 

13 

6O0O0      " 

.60 

26000  00 

July  26 

37 

40000      " 

.60 

17000  00 

12000      " 

6000  00 

Joly  £0 

14 

20000      " 

.60 

10000  00 

ILLUSTRATION    N<  I.    93. 


STORES    RECORD    BOOK 


l'17.  The  difference  between  the  quantity  received  and  the  quantity  issued 

from  day  to  day  or  ti to  time  is  the  balance  nn  hand,  always  a!  cost.    Cosl 

means  the  invoice  price  plus  the  freight  and  handling  charges,  if  that  can  lie 
ascertained  readily.  It'  nut.  it  may  lie  charged  in  a  separate  account  and  pro- 
rated later,  and  the  invoice  cosl  used.  It  will  he  seen  thai  the  stores  record 
is  a  perpetual  inventory.  It  is  controlled  by  the  Raw  .Materials  account  in  the 
i  ieueral  Ledger. 

218.  Assume,  for  illustration,  that  the  K'aw  Materials  Inventory  at  the  be- 
ginning was  $3,000.  The  purchases  during  the  period  was  $60,000.  The 
various  quantities  issued  during  the  period  on  requisition  was  $57,000. 

When  ties,-  purchases  are  entered  in  the  General  Books,  and  posted  to  the 
dehil  of  Raw  Materials  account,  and  the  various  Requisition  Orders  are  en- 
tered, and  posted  to  the  credit  of  Raw  Materials  account,  the  Raw  Materials 
account  in  the  General  Ledger  will  appear  as  follows: 

Raw  Materials 


dan.     L'.">    Issued    Re,,.    No     35   $20,000 

May    20  Issued  Req.  No.  36     20, 

July    25   Issued   Req.  No.  37     17,000 


■  Ian.        1     Inventory $   3,000 

15  Purchases 25,000 

May   15  Purchases 25,1 

July  20  Purchases 10.000 

219.  Control  of  Materials:  The  balance  of  Raw  Materials  accounl  is  $6,000 
and  the  balance  shown  by  the  Stores  Record  hook  must  equal  this  amount,  so 
the  Raw  Materials  account  in  the  General  Ledger  controls  the  stores  Ledger. 
If  then-  are  various  kinds  of  materials  used,  there  must  he  a  similar  Stores 
Ledger  sheet  for  each  Kind,  size  or  grade.  The  stores  Ledger  controls  the 
materials    in    the    factory    somewhat    like    the    ('ash    Hook    controls    the    Cash. 

There  is  no  standard  form  of  Stores  Ledger  Record.     A  form  is  designed  to 
suit  the  case. 


BOOKKEEPING  AND  ACCOUNTING 


217 


220.  At  the  time  the  requisitions  were  issued  and  the  entries  made  to  credit 
Raw  Materials  account  in  the  General  Ledger,  Materials  in  Process  account  was 
debited  for  the  amount  issued. 


Materials  in  Process $20,00 

Raw  Material    

For  materials  issued  on  requisition  No.  35 


$20,000 


221.  This  Materials  in  Process  account  is  debited  for  all  materials  issued 
and  put  in  process  of  manufacture  and  is  credited  for  all  materials  consumed 
in  manufacture  of  Finished  Goods.  The  balance  of  Materials  in  Process  account 
shows  the  inventory  of  Materials  remaining  in  process,  and  should  be  equal 
to  the  total  of  all  the  materials  columns  of  the  cost  sheets  of  the  cost  Ledger  of 
all  the  jobs  not  completed.  (See  the  form  of  Cost  Sheet  following.)  This  ac- 
count controls  the  Materials  on  the  Cost  Sheets,  which  must  be  accounted  for 
accordingly. 

222.  The  Stores  Record  must  account  for  all  materials  received  and  issued. 
Materials  are  issued  to  the  various  departments  for  work  in  process  on  requisi- 
tion. This  requisition  specifies  the  quantity  required  and  should  designate  the 
1'iirpose  for  which  it  is  to  be  used.  There  arc  various  forms  of  requisition 
blanks.    The  following  is  a  simple  form: 


Requisition  No.  32 


Deliver  to  Department  A. 
For  Job  No.  1 


the  following: 


Quantity 

Kind  of  Materials 

Price 

Total 

598  yds. 

Blue  Serge  (a) 

1 

25 

747 

50 

0.    K.    by 


a^a. 


Supt , 


<%%< 


ILLUSTRATION    NO.    94.       REQUISITION    BLANK 


223.  When  a  requisition  is  received  and  the  materials  are  issued,  the  record 
is  made  in  the  Stores  Record  Book  as  shown  in  the  illustration  of  the  Stores 
Record. 

224.  A  Materials  Record  Book  is  kept  to  show  the  materials  consumed  in 
manufacturing  a  particular  unit,  and  when  the  amount  of  materials  for  each 


-is 


BOOKKEEPING  AND  ACCOUNTING 


unit  is  ascertained,  it  is  posted,  or  charged  to  thai  particular  joh  in  the  Materials 
Record  Book.    The  Following  is  one  form  of  a  Materials  Record  Book. 

Materials  Record 


Charge   to  job  Number 

Seqaisition 
number 

1 

p 

3 

4 

5 

6 

7 

8 

9 

32 
33 
34 

7-17 

50 

250 

00 

235 

00 

ILLUSTRATION    NO     D5.      MATERIALS    IIIX'ORD    BOOK 


The  cost  of  materials  issued  for  a  job  is  entered  in  the  column  of  thai  - 1 « ■  1 »  No. 
At  the  end  of  each  month,  these  columns  are  totaled  to  ascertain  the  cosl  of 
materials  used  on  each  job.  In  order  to  avoid  the  taking  of  physical  inven- 
tories as  much  as  possible,  it  ma.\  be  required  that  for  the  last  few  days  of  the 
month,  no  more  material  than  is  absolutely  necessary  be  requisitioned. 

l'l'.T  The  results  of  the  Materials  Record  for  each  job,  each  month,  is  trans- 
ferred to  the  Cosl  sheets  in  the  Cos1  Ledger.  Bach  job  is  given  a  Cos1  Sheet, 
and  the  cosl   of  materials  is  posted   from  the  Materials  Record  to  thai  jol>. 

following  is  a  form  of  Cosl   si t   in  the  Cosl 


designated   by 
Ledger. 


Job  No.  1 
Description. 


Tin 


Coats. 


COST  SHEET 


Year.  192 
Price 


tlateriala 

direct 

Factory 

Month 

Quantity 

Unit 

Consumed 

Labor 

Overhead 

Froduced 

Cost 

747 

50 

1275 

00 

OP 

Jan 

Fob 

Inarch 

April 

May 

June 

July 

500 

c 

01 

A  u  " 

3ert 

Oct 

Nov 

Deo 

ILLUSTRATION    NO     08       COST    LEDl 


BOOKKEEPING  AND  ACCOUNTING 


21  & 


The  cost  of  materials  for  Job  No.  1  is  posted  from  the  Materials  Record 
Book.  Assume  that  the  Payroll  Summary,  made  from  the  workers'  tickets  for 
each  job,  shows  that  the  Direct  Labor  for  Job  No.  1  is  $1,27.3. 

Assume  that  the  Indirect  Expense  upon  which  it  is  apportioned  to  be  charged 
to  each  job,  is  $482  for  Job  No.  1.  Then  the  charges  on  the  Cost  Sheet  of  Job 
No.  1  should  be  as  shown  in  the  above  Cost  Sheet. 

228.  The  summing  up  of  the  results  are  simple  enough,  after  all  the  facts 
are  ascertained  by  the  cost  system.  To  illustrate  assume  that  the  Cost  Sheet 
of  a  job  shows  Materials  consumed  $747.50,  Direct  Labor  cost  $1,275,  Indirect 
Expense  or  Factory  Overhead  apportioned  $482,  and  that  the  Selling  Expense 
apportioned  and  charged  to  this  job  is  $275,  and  the  Administrative  Expense 
apportioned  is  $175,  and  other  expenses  apportioned  $50.     Calculate  the  unit 

cost. 

JOB  No.  1.     (500  COATS) 


Total  Cost 

Unit  Cost 

Materials 
Direct  Labor 
Factory  Overhead 

747 

1275 

482 

50 
00 
50 

5 
6 

01 
01 

Manufacturing  Cost 

Selling  Expense,  Apportioned 
Administrative  Expense.  Apportioned 
Other  Expenses,  Apportioned 

2505 

275 

175 

50 

00 

00 
00 
00 

Total  Pinal  Cost 

3005 

00 

ILLUSTRATION    NO.   07.      SUMMARY   OF   20STS 


226.  Payroll:  The  workers  register  the  time  of  their  arrival  and  of  their 
departure  on  a  time  clock,  and  from  these  time  tickets  the  payroll  is  made  up. 
The  foreman  in  charge  of  each  department  will  indicate  on  the  card  of  each 
worker  the  job  number  of  the  job  on  which  the  worker  is  employed  and  to 
which  his  wages  will  apply.  There  are  some  complications  when  workers  are 
employed  on  different  jobs  during  the  day,  but  each  change  and  the  time  is 
indicated  on  the  worker's  time  card  or  ticket,  so  that  in  making  up  the  summary 
the  proper  charge  can  be  made  to  each  job  on  which  employed.  A  worker  may 
be  employed  part  of  the  day  on  productive  work  and  part  on  unproductive  work. 
The  time  ticket  will  indicate  the  part  applied  to  Direct  Labor,  and  that  to  be 
applied  to  indirect  labor.  Separate  time  tickets  may  be  used  for  each  change. 
The  form  of  the  time  ticket  is  designed  to  record  the  information  desired.  A 
form  may  be  designed  to  show  the  efficiency  of  the  worker.  There  are  about 
as  many  different  forms  of  cost  records  as  there  are  different  lines  of  business, 
and  even  businesses  in  the  same  line.  It  is  useless  to  attempt  to  show  dif- 
ferent forms  here.  The  thing  to  do  is  to  study  the  particular  business  and 
decide  upon  the  information  desired  and  then  design  forms  to  get  it. 

From  the  time  tickets  of  the  day,  the  total  time  and  wages  are  obtained  for 
the  day,  the  total  time  and  wages  of  Direct  or  Productive  labor,  and  the  total 
wages  to  be  charged  to  each  job  or  department,  and  the  names  of  workers,  time 
and  rate  are  entered  on  the  payroll  sheet.  At  the  end  of  the  week  or  two 
weeks  the    payroll  is  completed   and   totaled.     A  single   check  is  drawn   for 


22i  i 


BOOKKEEPING  AND  ACCOUNTING 


each  payroll,  and  entered  in  the  Cash  Book,  debiting  Payroll  account  or  Labor 
payroll.    The  following  is  n  form  of  a  Payroll  Book: 

PAYROLL  BOOK 

Fay  Roll  BO.  2.  Sheet  No.  2 

Fay  Roll  for  i:onth  Ending  January  31.  19 


games 


Clock  | 
Ho. 


Wages 


ueduotlons 


Act  , 
due 


Productive 
hrs.    amt. 


Eon- 
hrs 


Prod  . 
atct . 


L.  Jones 

C.  Cofer 
P.  »eyer 
J .  Logan 

D.  Uartln 
P  SohultE 
L.  Killer 
J.  Pears 
".  Sinner 

L.  i/033 

D.  Frbr.k 

R  Koran 

B.  Luoas 

J.  Ellis 

It.  2ook 

J.  ^-Jllen 

A.  Patton 

U.  lorer.L 

A.  Zlon 
Total 


50 

51 
52 
63 
54 
55 
56 
57 
56 
59 
60 
61 
62 
63 
64 
65 
66 
67 
66 


200 
150 
100 
100 
175 
175 
150 
165 
100 
125 
135 
150 
125 
50 
100 
150 
150 
150 
150 


2600 


200 
160 
100 
100 
17? 
175 
150 
165 
100 
125 
135 
150 
125 
50 
100 
150 
150 
160 
150 


:6co 


220 
220 


200 
150 


220   175 
220  I  175 


220 
220 


220 
220 


160 
220 
220 
220 
220 


2620 


150 
165 


135 
150 


100 
150 
150 
150 
150 


000 


or 


220 

220 


220 
220 


220 
110 


1210 


100 
100 


100 
125 


50 


600 


CO 


ILLUSTRATION    NO    98.      PAY  ROLL    BOOK 


At  the  end  of  the  month,  tin'  dired  Labor  is  transferred  from  the  Pay  Roll 
account  to  Direcl  Labor  account,  and  tin*  Indirect  Labor  is  transferred  to  In- 
direct Expense  account,  closing  the  Pay  Roll  account,  requiring  the  following 
journal  entry.  If  it  is  desired,  an  extra  column  for  Selling  Expense  may  be 
added  to  record  the  wanes  of  the  sales  force. 

Direcl    Labor    $2,000 

Indirect   Expense   600 

Paj  Roll  $2,600 

227.  It'  any  money  were  advanced  to  workers,  it  would  appear  in  the  Deduc- 
tions column,  and  be  entered  in  the  Cash  Book,  charged  to  Pay  Roll.  Then  the 
Amount  Due  column  would  be  thai  much  less,  and  when  the  check  for  the 
amount  due  on  the  Pay  Roll  is  charged,  the  Pay  Roll  account  would  be  the 
same.  $2,600. 


BOOKKEEPING  AND  ACCOUNTING  221 

228.  If  the  Direct  Labor  is  to  be  charged  to  each  job,  the  record  cards  of  the 
workers  would  be  assembled  and  a  summary  made  of  the  amount  to  be  charged 
to  each  job.  This  summary  would  show  the  Job  No.  and  a  column  for  the  num- 
ber of  hours  and  the  amount  for  each  Job.  No.  The  total  amount  for  each  job 
would  then  be  posted  to  the  Cost  Sheet  of  each  job,  under  the  head  of  Direct 
Labor.  At  the  time  this  Direct  Labor  is  charged  to  each  job,  Direct  Labor  ac- 
count is  credited  with  the  total  labor  consumed  on  the  completion  of  the  jobs. 

229.  The  balance  of  Direct  Labor  account  will  show  the  direct  labor  on 
work  in  process,  not  completed,  and  should  be  equal  to  the  total  of  direct  labor 
on  the  Cost  Sheets  of  uncompleted  jobs.  Thus  Direct  Labor  account  controls 
the  direct  labor  charges  on  the  cost  cards. 

230.  Indirect  Expense:  Indirect  Expenses  are  indirect  labor  and  all  other 
expenses,  such  as  light,  heat,  taxes  on  plant,  insurance  on  plant,  repairs,  sup- 
plies, rent,  depreciation,  etc.,  that  are  a  part  of  the  cost  of  production,  but  can- 
not be  separated  and  charged  to  particular  units.  It  must  be  porated  or  ap- 
portioned. These  expenses  are  charged  to  Indirect  Expense  or  Factory  Expense 
account.  When  the  amount  of  indirect  labor  is  ascertained  from  the  Pay  Roll 
records  the  amount  is  transferred  to  Indirect  Expense  account  from  the  Pay 
Roll  account  as  shown  in  the  entry  following  Pay  Roll  illustration. 

The  Indirect  Expense  is  prorated  or  apportioned  and  charged  to  the  different 
units  on  the  basis  of  a  percentage  of  the  Direct  Labor  or  a  percentage  of  Prime 
Cost  (Material  and  Direct  Labor).  On  whatever  basis  has  been  decided,  the 
part  of  Indirect  Expense  that  should  be  charged  to  each  job  is  charged  to  each 
unit  or  job  on  the  Cost  Sheets  and  the  total  applied  on  the  Finished  product  is 
credited  to  Indirect  Expense  account.  The  balance  of  this  account  will  show 
the  cost  of  indirect  expense  that  has  been  charged  or  is  to  be  charged  to  the 
jobs  or  units  that  are  not  completed,  and  thus  controls  the  Indirect  Expense  in 
process,  the  inventory  of  which  would  equal  the  balance  of  Indirect  Expense 
account. 

231.  To  Apportion  Indirect  Expense:  The  matter  of  correctly  apportioning 
the  Indirect  Expense,  Burden  or  Factory  Overhead,  to  the  various  units  is  the 
most  difficult  in  cost  accounting.  Not  so  difficult  after  the  basis  has  been  de- 
termined, but  it  is  difficult  to  decide  what  basis  would  be  the  most  equitable 
for  a  particular  business.  The  following  illustration  shows  the  plan  of  dis- 
tributing the  Factory  Overhead  based  upon  a  percentage  of  Direct  Labor, 
and  also  upon  the  basis  of  Productive  Hours.  Illustration  No.  100  shows  the 
Selling  Expense  and  other  expenses  distributed  to  the  unit  on  a  percentage  of 
the  '"Cost  of  the  goods  sold."  Illustration  No.  101  shows  the  amount  that  is 
apportioned  and  should  be  charged  to  each  job,  based  upon  Direct  Labor  and 
also  based  upon  Prime  Cost  (Materials  plus  Direct  Labor),  assuming  that  the 
Factory  Overhead  for  the  period  was  $5,500. 

It  will  be  noticed  that  there  is  quite  a  difference  between  the  amount  to  be 
charged  to  Job  No.  1  and  No.  2,  and  the  other  jobs  also,  when  calculated  on  the 
basis  of  Direct  Labor  and  when  calculated  on  the  basis  of  Prime  Cost.  Which 
is  better?  The  question  cannot  be  answered  without  actual  contact  with  the 
operations  in  the  particular  business.  This  is  the  reason  it  is  said  that  the 
distribution  of  the  Factory  Overhead  is  the  most  difficult  for  the  accountant 
to  accurately  determine  in  cost  accounting. 


222 


BOOKKEEPING  AND  ACCOUNTING 


Proposition  1.     There  is  some  connection  or  relation  a  the  cost  of 

Direcl  Labor  of  each  department  and  the  total  of  all  other  expenses,  hence,  the 
Overhead  may  be  distributed  to  and  charged  to  each  department  on  tl 
the  Direcl  Labor  Cost.     Prom  thi    following  e  the  Overhead  or 

Burden  on  the  basis  of  a  percentage  of  Direcl  Labor: 


Power  Expense  .  .  . 
Building  Expense   .  . 

Repairs    

Taxes    

Depreciation  .  .  .  . 
Indirect  Labor  .  .  . 
Factory  Expense  .  .  . 
Factory  Supplies  .  . 
Miscellaneous  Expense 

Insurar.ae  

Total    

Direct  Labor   .  .  .  . 


Factory  Overhead 


Totals 


$8450 
4000 
5650 

550 
2800 
7500 
5250 

600 
2150 

640 


37790 


Eept 


$2800 

1350 

1850 

175 

1250 

2750 

1750 

250 

675 

160 


13210 

39660 


Dept . 


#3750 

115  0 

2250 

225 

900 

2950 

2250 

375 

95  0 

280 


15660 
61320 


Dept.  C 


11900 

1500 

1550 

L50 

r^O 

1800 

1250 

175 

325 

200 

9500 

19000 


ILLUSTRATION   -VO.    DO       niSTKIHI'TIOX  OF  INDIRECT    EXP1 


Solution  : 

Departmenl   A:     Overhead  $13,210.     Direcl   Labor,  $39,61 
$13,210  divided  b  I  is  33  1 

Departmenl   B:     Overhead,  $1  1,080      Dired   Labor  $61,320; 
$15,080  divided  bj  $61,320  is  2595  . 

Departmenl    C.     Overhead    $9,500.      Direcl    Labor  $19,000; 
100  divided  by  $19,000  is  50?!  . 

Proposition  2:  Assume  the  productive  hours  in  the  above  illustration  to 
be:  Department  A,  16,500  hours.  Departmenl  B,  28,500  hours.  Departmenl 
C,  47,500.     Distribute  the  overhead  on  the  basis  of  productive  hours 


Solul  ion  : 


Departmenl     A:      Overhead,    $13,210.      Productive    hours, 
16,500;  $13,210  divided  by  16,500  is  80  cents  per  hour. 

irtmenl     I!:      Overhead,     $15,080.       Productive     hours 
28,500;  $15,080  divided  bj  28,500  is  52.9  <  r  hour. 

DepartmentC:    Overhead  $9,500.    Productive  hours,  19,000; 
$9,500  divided  bj    19,400  is  50  cents  per  hour. 


BOOKKEEPING  AND  ACCOUNTING 


223 


Proposition  3:  The  percentage  of  Shipping  expense,  Selling  expense  and 
General  or  Administrative  expense  to  be  charged  to  each  department,  piece  or 
job  to  arrive  at  the  ''cost  to  make"  may  be  determined  by  dividing  the  total  of 
shipping',  selling  and  general  expense  by  the  "cost  of  the  goods  sold"  for  a 
given  period. 

From  the  following  data,  calculate  the  percentage  to  be  charged  for  ship- 
ping, selling  and  general  expenses,  assuming  the  "cost  of  the  goods  sold"  to 
be  $125,000. 

.Shipping,    Selling  and  Admlnist rat lve   Expense 


Distribution 


Total 


Shipping 


Selling 


Admin . 
Expense 


Labor      

Diaoount  on  Sales   .  . 

Salaries  

Officers'  Salaries  .  . 

Depreciation  

Repairs   

Commissions   

Advertising   

Building  Expense  .  .  • 

Insurance   

Taxes     

Delivery  Expense  .  •  • 
Heserve  for  Bad  Debts 
Miscellaneous  Expenses 
Total   


1250 

1500 

12330 

5250 

450 

175 

3750 

1750 

1080 

320 

375 

2750 

1250 

520 


32750 


TO 

on 

00 

00 
00 
no 
00 
00 
00 
00 
00 
00 
00 
00 


12F0I  00 


125 


75 

450 

25 

125 


150 


00 


2200 


00 


00 

oc 

00 
00 


00 


12330 


3750 
1675 


370 


00 


18125 


00 


oo 

00 


00 


1500 

5250 
325 
175 


&30 

295 

250 

2750 

1250 


On 


12425 


00 

00 
00 
00 


00 
00 
00 
00 
00 


00 


ILLUSTRATION'  NO.   100.      DISTRIBUTION   RATE 


Total  Shipping,  Selling  and  Administrative  Expenses.  .$  32,750 

Cost  of  Goods  Sold 125,000 

$32,750  divided  by  $125,000  is  26.2%. 

Proposition  4:  Assume  that  at  the  end  of  the  month  the  depreciation  and 
all  supplementary  accrued  and  deferred  items  have  been  determined,  and  the 
Factory  Overhead  is  found  to  be  $5,500.  Assume  further  that  the  cost  of  mate- 
rial and  direct  labor  for  each  job  is  as  shown  in  the  following  illustration.  Cal- 
culate what  part  of  this  $5,500  should  be  charged  to  each  job,  on  the  basis  of  the 
proportion  of  Direct  Labor  and  on  the  basis  of  Prime  Cost  (materials  consumed 
plus  direct  labor),  in  the  following  six  jobs: 


Job  Numbers 

1 

Z 

3    |    4 

5 

6 

Total 

Materials 
Direct  Xabor 

4500 
7250 

00 
00 

5250 

4325 

00 
00 

2250 
8850 

00  J  1200 
00  J  1750 

00 
00 

3750 

4500 

00 
00 

7500 
9875 

00 
00 

24450 
30550 

00 
00 

Total 

11750 

00 

9575 

00 

5100 

OOJ  2950 

00 

6250 

00 

17375 

00 

55000 

00 

1 

1 

■  1 

Illustration  No.  101.    Distribution  of  Factory  Overhead  or  Indirect  Expense  on 
Basis  of  Direct  Labor,  and  on  Basis  of  Prime  Cost 

Solution :    On  the  basis  of  Direct  Labor,  the  amount  of  the  Overhead  to  be 
charged  to  Job  No.  1  would  be     7250      of  $5,500  or  $1,305.25. 

30550 
Job  Xo.  2 :     4325     of  $5,500  or  $778.64,  and  so  on  for  the  other  jobs. 
30550 


224  BOOKKEEPING  AND  Al  I  01  NTING 

On  the  basis  of  Prime  Cosl  (materials  plus  direcl  labor)  the  amounl  of 
( (verhead  to  be  charged  to  each  job  would  l"- : 

Job.  No.  1  :    1 1  ~-~»<  i    of  $5,S r  $1,175. 

55000 
Job.  No.  2:    9.">7.">    of  $5,50i  i7.50,  and  so  on. 

"55000 

Explanation:  In  tin'  tir.st.  tin-  total  n^i  of  Direct  Labor  for  all  the  jobs  is 
$30,550.  Then  Job.  No.  1  should  be  charged  such  a  part  of  the  $5,500  as  $7,250 
is  a  part  of  the  total,  $30,550. 

1  hi  the  basis  of  Prime  <  lost,  the  total  of  the  Prime  '  losl  on  all  jobs  is  - 
The  Prime  Cosl  of  Job  No.  1  is  $11,750.    The  Job  No.  1.  on  this  basis,  should 
be  charged  such  a  pari  of  the  $5,500  as  $11,750  is  part  of  $55,000,  or  $1,175. 

It  will  lie  noticed  that  on  the  basis  of  Direcl  Labor  the  part  of  the  $5,500  to 
be  charged  to  Job  No.  1  is  $1,305.24,  while  on  the  basis  of  Prime  Cosl  the  amount 
to  lie  char-red  to  Job  No.  1  is  $1,175.  There  is  $130.24  difference.  Which  is 
better!  That  depends  upon  the  nature  of  the  business.  Those  in  personal  eon- 
tact  with  the  facts  must  decide  that.  This  is  the  reason  that  indirect  Expense  or 
Factory  Overhead  i^  dis!  ributed  on  differenl  bases  for  different  plants. 


MANUFACTURING  ACCOUNTS 

L'-'iL'.  Manufacturing  Account:  The  .Material-  in  Process  account,  the  Direct 
Labor  account  and  the  indirect   Expense  or  Factory  Expense  account  might 

all  be  kept  under  the  one  account  "Manufacturing  Account.'"  in  which  case 
all  id'  the  variou-  costs  shown  in  these  three  accounts  would  he  debited  to  Man- 
ufacturing Account,  and  finally  an  analysis  sheet  could  show  the  detailed  facts. 
hut  the  three  accounts  are  used  in  the  next  set.  to  show  how  they  may  he  used  as 
controlling  accounts  to  control  the  cost  records  for  materials.  Labor  and  indirect 

expenses. 

The  following  will  serve  as  a  guide  in  debiting  and  crediting  the  manufac- 
turing cost  accounts  : 

233.  Raw    Materials    Account:      .Materials    are    issued    from    stores    upon 
requisition  only.    The  inventory  of  materials  on  hand  as  shown  by  the  S 
Record  or  stores  Ledger  must  agree  with  the  balance  shown  by  the  Raw  Mate- 
rials account.    Thus  this  accounl  controls  the  stores. 

Debit  Raw  Matt  rial*  Account:  Credit  Raw  Materials  Account : 

1.  For  all   materials  purchased   to  he  4.   For    any     materials     issued     from 
used  in  manufacturing.  Stores  on  requisition,  at  cost,  and 

2.  For  all    freight,  cartage   and  any  at  the  same  time  debit    Materials 
charges   to   place    the   materials   in  in   Process  Account. 

Stores,  unless  a  separate  a unit  is 

kept  for  freighl  and  cartage. 

:i.   For  any  materials  returned    Irom 
Work    in    process    which    has    been 

issued  on  requisition. 

If  materials  are  received  in  mixed  shipments  so  the  proper  amount  for  freighl 
and  handling  cannot  be  charged  to  each  kind  of  material,  or  for  any  other  rea- 
son, a  separate  accounl  may  be  kept  lor  these  charges,  and  then  prorated  later 

or  at  the  end  of  the  period. 


BOOKKEEPING  AND  ACCOUNTING  225 

234.  Work  in  Process :  Work  in  process  involves  three  accounts,  Materials 
in  Process,  Direct  Labor  and  indirect  Expense  accounts.  The  term  "Work  in 
Process"  covers  the  manufacture  from  the  time  the  raw  materials  are  issued 
from  Stores  until  the  Finished  Goods  are  ready  for  sale  or  delivery. 

235.  Materials  in  Process:  The  materials  issued  from  Stores  and  put  in 
process  of  manufacture,  is  represented  by  Materials  in  Process  account.  The 
materials  actually  consumed  plus  the  cost  of  Direct  Labor  is  the  Prime  Cost  of 
the  goods  manufactured. 

Debit  Materials  in  Process  Account :     Credit  Materials  in  Process  Account: 
1.  For   all   materials   received  from  2.  For    all    materials    returned    to 

Stores  on  requisition,  at  cost,  and  Stores,  at  cost, 

at  the  same  time  credit  Raw  Mate-  3.  For  the  value  at  cost  of  the  mate- 

rials account.  rials  actually  consumed  in  manu- 

facture,   and    at    the    same    time 
debit,  Finished  Goods  account. 

The  cost  of  material  in  process,  shown  by  the  Cost  Sheets  of  the  work  not 
completed,  must  equal  the  balance  of  this  account,  which  is  the  inventory  of 
materials  in  process,  and  thus  this  account  controls  the  materials  in  process. 

236.  Direct  Labor:  Direct  Labor  is  the  labor  employed  in  the  actual  direct 
operations  of  manufacturing  the  product  of  the  factory.  Indirect  Labor  is 
labor  that  cannot  be  specifically  identified  with  or  charged  to  any  particular 
job  or  other  unit.     The  term  Productive  Labor  is  also  used  for  Direct  Labor. 

Debit  Direct  Labor  Account :  •      Credit  Direct  Labor  Account : 

1.  For  all  wages  paid  for  direct  la-  2.  For  the  amount  of  direct  labor  as 

bor,   as   shown  by  the  Pay  Roll  shown  by  the  Cost  Sheets  of  the 

records.  Cost  Ledger  on  all  jobs,  orders  or 

contracts  finished. 

The  total  amount  of  direct  labor  shown  by  the  Cost  Cards  or  Cost  Sheets 
of  the  Cost  Ledger  on  jobs,  orders  or  Contracts  not  completed  must  equal  the 
balance  of  Direct  Labor  account,  which  is  the  inventory  of  Direct  Labor  in 
Process.    Thus,  this  account  controls  the  direct  Labor  in  Process. 

237.  Indirect  Expense:  Indirect  Expense  variously  termed  Manufactur- 
ing Expense,  Factory  Overhead  or  Factory  Expense,  are  such  as  heat,  light, 
power,  supplies,  indirect  labor,  superintendence,  rent,  repairs,  insurance  on 
plant,  depreciation  on  plant,  machinery  and  tools,  etc. 

Debit  Indirect  Expense  Account:  Credit-Indirect  Expense  Account: 

1.  For  salary  of  foremen,  superin-  4.  For  amount  apportioned  and 
tendents  and  other  salaries  that  charged  to  completed  jobs,  orders 
affect  factory  expense  which  can-  or  contracts,  and  charged  to  some 
not  be  applied  to  any  particular  other  account,  in  the  cost  of  fin 
unit.  ished  goods. 

2.  For  indirect  labor  and  supplies  5.  For  any  rebates  or  allowances 
that  enter  into  the  cost  of  the  that  affect  a  charge  to  this  ac- 
goods.  count. 

3.  For  rent,  heat,  light,  power,  water, 
taxes,  insurance  on  plant,  depre- 
ciation, and  any  factory  expense. 

The  remainder  of  Indirect  Expense  not  apportioned  to  the  finished  product, 
but  charged  in  the  work  in  process,  as  shown  by  the  cost  records,  must  equal 
the  balance  of  this  account.  Thus  the  balance  of  this  account  controls  the  In- 
direct Expense  in  process,  and  is  the  Indirect  Expense  Inventory. 


226  BOOKKEEPING  AND  ACCOUNTING 

Distribution:  Ladirecl  Expense  is  the  mosl  difficult  for  the  Accountant  to 
distribute  accurately  to  the  various  units  (jobs,  orders  or  contracts)  at  the 
end  of  the  month  or  period.  Thej  are  apportioned  mi  a  liasis  that,  from  the 
nature  of  the  business,  would  -'■•■m  to  be  the  must  accurate,  that  is  on  ;i  basis 
of  the  relation  of  tin'  job,  quantity  or  contract  to  the  total  factory  expense. 
The  basis  is  differenl  in  differenl  factories  on  account  of  the  difference  in  this 
relation.  Indirect  Expense  may  be  distributed  on  the  basis  of:  (See  Illustra- 
tions 99  and  101.) 

1.  Direct  Labor.  4.  Prime  Cost  (Materials  plus  Direct 

2.  Total  Productive  Hours.  Labor). 

:i.   .Materials  consumed.  5.  Total  number  of  units  produced. 

238.  Finished    Goods:      Finished    Goods,    as    the    name    implies,    arc    the 

g Is  completed  and  ready  Eor  delivery,  for  sale,  or  ready  to  be  sent  to  the 

warehouse. 

Debit  Finish*  <l  (loads  Account:  Credit  Finished  Goods  Account: 

1.  For  the  eosl   of  goods  completed  2.  For  the  "cost  of  sales"  for  the 

during  tin    period,  at  cost,  tiial   is.  month  or  period,  as  shown  by  the 

i-ost  of  material,  direct   labor,  anil  n I'd     of     the     "Cost     of    goods 

indirect  expense,  as  shown  by  the  sold." 
Cost   ('arils  or  ( 'osl    Sheets  of  the 
Cost      Ledger,     or     the     Finished 
t  foods  Journal. 

The  balance  of  this  account  shows  the  balance  of  Finished  Goods  on  hand, 
in  stock,  the  inventory.  Thus  this  account  controls  the  Stock  Ledger  or  the 
Finished  Goods  on  hand. 

239.  Cost  of  Sales:  The  completion  of  the  finished  goods  is  the  end 
of  the  cost  of  production,  and  the  beginning  of  the  cost  of  selling  and  cost 
of  administration.  In  preparing  statements,  the  Manufacturing  Section  ends 
at  this  point,  and  the  Trading  Section  begins.  The  connection  of  the  two  sc,- 
tions  is  in  the  debit  to  the  "Cost  of  Sales"  account  and  the  credit  to  Finished 
i  ioods  account. 

I>,  hit  Cost  of  Sales  Account:  Credit  Cost  of  Sales  Account: 

1.   For  tin- "cost  of  g Is  sold,"  and  2.  For  the  amount    to   (lose   the   ac- 

at  the  same  lime  credit  the  Fin-  count  into  Profit  and  Loss, 

ished  <  binds  account. 

There  are  differenl  ways  of  arriving  at  the  "Cost  of  Sales."  The  cost 
price  may  be  entered  in  a  column  provided  in  the  Sales  Hook,  and  the  cost 
as  well  as  the  selling  price  shown.  The  cost  and  selling  price  may  be  entered 
on  all  orders,  from  which  the  cost  can  be  tabulated.  Only  one  entry  tor  the 
month  or  period  is  made,  debiting  "Cost  of  Sales"  and  crediting  "Finished 
(Ioods"  for  the  same  amount. 

The  differenl  forms  of  Cost  Cards.  Cost  Sheets  ami  books  for  a  complete  cost 
system  cannot  be  illustrated  here.  Space  will  not  permit  it.  However,  a  good 
idea  of  them,  how  to  design  them,  the  purpose  for  which  they  are  to  be  used,  and 
the  business  the  more  detailed  information  is  necessary,  requiring  other  con 
the  principle  for  obtaining  the  results,  is  conveyed.  The  more  complicated 
trolling  accounts,  but   the  principle  would  remain  the  same. 


BOOKKEEPING  AND  ACCOUNTING  227 

VALLEY  TANNING  COMPANY.    A  CORPORATION 

240.  In  the  foregoing,  different  forms  were  suggested  and  illustrated  which 
are  designed  to  obtain  necessary  cost  information  so  that  the  proper  charge  for 
material,  direct  labor  and  indirect  expense  could  be  applied  to  each  job,  order, 
contract  or  other  unit.  There  are  many  different  forms  and  these  illustrated  arc 
only  suggestive.  Each  business  would  require  forms  peculiar  to  it,  but  those 
illustrated  with  the  suggestions  given,  outline  the  information  necessary  to  be 
obtained  by  a  cost  system. 

241.  This  set  has  no  connection  with  the  forms  already  illustrated  except 
the  illustration  of  the  Payroll.  The  Payroll  Book  for  this  business  would  be 
similar  to  the  illustration  shown  except  that  another  column  should  be  added 
for  "Selling  Expense."  to  provide  for  that  part  of  the  Payroll  that  applies  to 
the  sales  force. 

242.  The  purpose  of  this  set  is  to  show  how  the  Raw  Materials  Purchases  ac- 
count, the  Materials  in  Process  account,  and  the  Supplies  account  control  the 
Materials  in  Stores  and  in  Process  in  the  factory,  and  how  the  Direct  Labor  and 
Indirect  Expense  accounts  control  the  Payroll  records  and  the  Indirect  Expenses. 
It  is  made  as  simple  and  short  as  possible  with  this  one  thing  in  view,  the  con- 
trol of  the  factory  operations  by  the  General  Ledger  accounts. 

243.  The  books  to  be  used  are  the  Purchases  Book  with  seven  columns: 
General,  Raw  Hides  Materials,  Tanning  Materials,  Supplies,  Indirect  Expense. 
Water  and  Selling  Expense,  similar  to  the  form  of  the  Purchases  Book  in  Chap- 
ter IX.  The  Sales  Book  is  of  the  ordinai'y  form.  The  Cash  Book  should  have 
three  columns  on  the  debit  side:  General,  Accounts  Receivable  and  Sales  Dis- 
count. The  credit  side  of  the  Cash  Book  should  have  three  columns :  Gen- 
eral, Accounts  Payable  and  Purchases  Discount.  The  Journal  should  have  two 
columns  on  the  left :  General  and  Accounts  Receivable,  and  on  the  right :  Gen- 
eral and  Accounts  Payable.  The  Journal  is  similar  to  the  Journal  in  Chapter 
VI,  except  that  it  has  two  columns  on  each  side  instead  of  three. 

244.  The  Tanning  business  is  selected  because  it  produces  only  one  com- 
modity, sole  leather,  and  the  purpose  is  to  use  the  usual  controlling  accounts, 
and  show  how  they  control  the  operations  in  the  factory.  The  materials  are  han- 
dled by  Lots  as  shown  by  the  Stores  Record  of  Raw  Hides  as  illustrated.  Similar 
forms  may  be  ruled  and  kept  for  Tannin",-  Materials  and  Supplies,  if  desired,  but 
the  illustration  of  the  Stores  Record  for  Raw  Hides  is  sufficient  to  show  a  form 
and  how  to  keep  a  record  of  the  materials  in  stores,  showing  a  perpetual  in- 
ventory. 

245.  As  only  one  commodity  is  produced,  there  is  no  unit  quantity  or  job 
to  which  to  charge  costs  of  materials,  direct  labor,  and  to  apportion  and  charge 
the  indirect  expense,  however,  materials  are  requisitioned  in  quantities  and  put 
through  the  process  of  manufacture  and  the  time  of  the  workers  is  kept  so  as  to 
show  the  direct  labor  that  has  been  consumed  on  the  goods  that  are  finished, 
and  the  amount  of  direct  labor  in  process  at  the  end  of  the  month  is  equal  to 
the  balance  shown  by  the  Direct  Labor  account.  Similarly  the  amount  of  in- 
direct expense  that  applies  on  the  goods  finished  is  apportioned  to  the  quantity 
completed,  at  the  end  of  the  month,  and  charged  to  the  Finished  Goods  account, 
and  the  indirect  expense  not  charged  to  the  finished  product  and  wrhich  ap- 
plies to  the  work  in  process  must  equal  the  balance  of  Indirect  Expense  ac- 
count. 


L'L'S 


BOOKKEEPING  AND  ACCOUNTING 


246.  A  Journal,  as  the  only  book  of  original  entry,  may  he  used  with  the 
same  results.  It'  a  Sales  Ledger  ami  Purchasi  I.-1  er  are  used,  special  columns 
must  be  provided  for  Accounts  Receivable  and  Accounts  Payable  as  these  arc 
controlling  accounts  in  the  General  Ledger.    The  instructions  and  suggestions 

following  each  transaction  is  given  with  a  view  in  using  the  1 ks  of  original 

entry  that  have  been  suggested,  hut  they  will  apply  whatever  forme  are  used. 


STOCK   PFCORD 


Description:   Raw  Hides. 


R  e  c  e  i  v  e  d 


192 


Lot 
No. 


Name 


Pounds 


Price 


Amount 


Jan 


Inventory 

C.  K.  Porter  &  Co. 
Swift  &  Co. 
Wilson  &  Co. 
Swift  &  Co. 


80,640  lbs. 
45.666  lbs. 


126,336 
47,720 
43.672 
45,696 


25 

20160 

00 

25 

11424 

00 

25 

11930 

00 

25 

10916 

00 

25 

11424 

00 

I  8  8  u  e  d 


192 


Req.  No.  Lot  l.lbs.  Lot  2.  lbs. 


Lot  3-lbs.  Lot  4-lbs. 


Balance 


Jan 


4 

39 

13 

42 

19 

45 

26 

48 

Total 


24192 


22176  00 
24698  00 
25956  00 
28224  00 


126336 


Il.I.rsxr. AT'OX  NO.   102.     ■-  ORD  HOOK 


l!47.  A  Similar  Stock  Record  Sheel  in  the  Stork  Keoord  Rook  rnnld  ho  used 
for  Tanning  .Materials  and  Supplies,  hut  that  is  qo1  required  in  this  set.  as  the 
illustration  of  the  perpetual  inventory  <>(  Raw  Eides  Matt  rials  seems  sufficient 
to  show  how  to  keep  the  record  for  any  materials.  A  more  elaborate  form  could 
he  d.viscd  that  would  show  the  balance  in  quantity  as  well  as  in  value,  lllus 
tration  No.  93  is  another  form.  There  should  he  a  separate  record  for  each 
kind  of  material.  In  the  purchases,  as  recorded  in  the  Purchases  Book,  the 
purchases  for  the  sales  force  are  do  pari  of  the  materials.    This  special  col 

u in  the  Purchases  Book  for  Selling  Expense  is  used  to  show  how  all  Pur 

chases  may  he  recorded  in  the  Purchases  Hook.  The  student  is  asked  to  read 
carefully  paragraphs  202  in  239,  and  study  the  forms  illustrated,  while  writing 
up  this  set,  although  they  are  not  directly  connected  with  these  transactions. 


BOOKKEEPING  AND  ACCOUNTING 


229 


BUSINESS  TRANSACTIONS 


Jan.  1.  The  Valley  Tanning  Co.,  manufacturers  of  Sole  Leather,  is  incor- 
porated under  the  laws  of  the  State  of  Ohio,  with  an  authorized  capital  of 
$75,000  divided  into  75  shares  of  the  par  value  of  $100.  All  the  stock  is  is- 
sued. On  January  1, 192  ,  after  closing  the  books  at  the  end  of  the  fiscal  period, 
December  31,  their  Ledger  accounts  showed  the  following  assets  and  liabilities: 


Assets : 

Cash   $14,970 

Notes  Receivable 5,750 

Hanson  Bros 2,235 

L.  IT.  Ames  &  Co 2,671 

Raw    Hides    Materials    Inven- 
tory, 80.640  lbs.  @  25c 20,160 

Tanning  Materials  Inventory.  .     4,020 

Supplies  Inventory 1.000 

Materials  in  Process  Inventory.  14,640 
Productive  Labor  in  Process. .     1,174 

Indirect  Expense 680 

Finished  Goods  Inventory 5,000 

Insurance 200 

Plant  and  Machinery 20,000 

$92,500 


Liabilities : 

Capital  Stock 

Notes  Payable — Lank 
C.  K.  Porter  &  Co ...  . 
J.  D.  Barnes  &  Co. . . . 


.$75,000 
.  10,000 
.  4,500 
.     3,000 


$92,500 


Set  up  these  accounts  in  the  Ledger  by  arranging  the  above  in  the  form  of 
an  opening  entry  in  the  Journal  and  posting.  Allow  each  account  ten  lines. 
Open  new  accounts  as  needed.  See  Corporation  Accounting  for  form  of  opening 
entry. 

Jan.  3.  Purchases:  Purchased  of  C.  K.  Porter  &  Co.  Raw  Hides  as  per 
Invoice  No.  32,  45,696  lbs.  @  25  cts.,  3/15,  n/60,  $11,424.  Purchased  of  J.  C. 
Barnes  &  Co.  Tanning  Materials  as  per  Invoice  No.  33,  3/15,  n/60,  $2,300.  Pur- 
chased Supplies  of  Jameson  Bros.,  as  per  Invoice  No.  34,  3/15,  n/60,  $850. 
Received  bill  from  Ellis  Bros,  for  printing  stationery  for  factory  use,  Invoice 
No.  35,  $125.  (Indirect  Expense.)  Received  bill  from  Rush  Printing  Co.  for 
printing  advertising  matter,  Invoice  No.  36,  $350.  (Selling  Expense.)  Received 
bill  from  the  City  Water  Works  for  water  to  be  used  in  process,  Invoice  No.  37, 
$400,  as  per  contract  for  the  month.    (Debit  Water  account.) 

Enter  separately  in  the  Purchases  Book,  in  the  General  column,  and  transfer  the  amount 
so  entered  to  the  special  column  of  the  proper  heading.  Rule  a  Stores  Record  sheet  and 
enter  the  inventory  of  Raw  Hides,  80,640  lbs.  @  25  cts.,  and  enter  the  purchases  of  Raw 
Hides,  45,696  lbs.  @  25  cts.,  as  in  the  Illustration  No.  102. 

Jan.  4.  Issued  from  stores  on  Requisition  No.  39  Raw  Materials,  Raw 
Hides,  37,632  lbs.  @  25  cts.,  $9,408.  On  Requisition  No.  40,  Tanning  Materials, 
$1,805.    On  Requisition  No.  41,  Supplies,  $100.     Water  used  in  process  $100. 

Enter  the  amount  of  Raw  Hides  issued  from  stores  on  requisition  in  the 
Stores  Record  and  show  the  balance  on  hand  $22,176.  Enter  the  materials 
issued  in  the  Journal: 

Materials  in  Process   $11,313 

Indirect  Expense   (Water)    10U 

Raw  Hides  Material    $9,408 

Tanning    Materials    1,805 

Water     1 00 

Supplies   100 

For  materials  issued  and  put  in  process.     Water  consumed  is  charged  to  Indirect 
Expense.     (See  Paragraphs  233,  234.) 


230  BOOKKEEPING  AND  ACCOUNTING 

Use  the  "Lot  1"  column  under  "Issued"  in  the  Stores  Record  until  all 
materials  of  "Lot  1 "  sd,  then  use  "Lot  2"  column. 

Jan.  6.  Paid  thi  Payroll  of  the  week  as  per  Payroll  Book,  $900,  including 
wages  of  sales  force. 

Debit  Payroll  account  on  the  credit  side  of  the  Cash  Book.  This  Payroll  includes 
direi  ndirecl  labor  and  wages  of  th< 

Jan.  8.  Sold  to  Parker  &  Davis  16,200  lbs  Sole  Leather  @  50  cts.  Sold  to 
Mehl  &  Levis  12,816  lbs.  Sole  Leather  (q  50  cts.    Terms  2  15,  n 

Jan.   10.     Paid  C.  K.  Porter  &  i  iOO  on  account.    Paid  J.  C.  Barnes  &  l 

$1,250  on  account.    They  allowed  us  3$  discounl  in  cadi  case. 

Divide  the  $1,500  by  .'.'7  to  find  the  amount  to  I >e  cl  I  to  C.  K.  Porter  &  Co     'I  i 

en  this  amount  and  $1,500  is  the  discount,    Do  the  same  tor  the  payment  to 

.1.  i  .  Barnes  ..v  Co.     I  i   partial  payments. 

Jan,  10.     Received  $1,250  from  Hanson  Bros,  on  a >unt,  ami  $1,000  from 

L.  11.  Ames  >.v  Co,  on  account,  and  allowed  l"  ,  discount  in  each  case. 

Divii  18  to  find  tl  '  t.i  be  credited  t,,  Sanson  Rros.    Tim  differ- 

ence is  the  Sales  Discount.    Do  the  same  foi  the  amount  received  from  I..  II.  Ames  ,\ 

Jan.  12.  Purchases:  Purchased  of  Swift  &  Co.  Raw  Hides  ;is  per  in, 
No.  38,  17,720  lbs.  (5  ■_':>  cts.,  3  15,  d  60,  $11,930.  Purchased  of  .1.  <  \  Barnes 
&  Co.  Tanning  .Materials  as  per  Invoice  No.  39,  $2,500.  Purchased  of  Jameson 
Bros.  Supplies  as  per  Invoice  No.  K'l.  $)?>Q.  U  ■  d  lull  for  advertising  from 
Brown  Bros.  Agency,  Invoice  No.  41,  $350.  Received  loll  from  Ellis  Urns.  I'm- 
printing  factory  stationery,  Invoice  No.  12,  $125.     (Indirect  Expense.) 

Jan.  13.  Paid  the  Payroll  Tor  the  week  including  labor  and  wages  of  the 
sales  force,  $900.  See  Jan.  6.)  Paid  Ames  Bros.  $112.50  for  repairing 
machinery. 

Jan.  13.     Sold  to  .1.  1).  Ryan  &  Co.  15,400  lbs.  Sole  Leather  c  50  cts.  Sold 

to  I-.  II.  Ames  &  Co.  13,416  His.  Sole  heather  («  50  cts.  Sold  to  Lacey  >\ 
Cable  30,000  lbs.  Offal  (a_  2  cts.    (Credit  to  .Materials  m  Process.) 

Enter  the  sales  in  the  Sales  Booh  as  usual,  excepl  the  Bale  of  Offal  t"  Lacey  &  Cable. 
Offal  i  hair,  dirt  and  -.     It  is  not  considered  worth  anything, 

and  whatever  i^  received  from  the  sale  of  it  is  deducted  from  tin'  ,-,>-t  of  the  material  used, 
therefore,  this  is  entered  in  tin'  Journal: 

i    .  ey  .V  Cable  $600 

Materials  in  I'  I  >ffal  i  $600 

P01     the    sale    of    30, II' 

Jan.   13.     Issued   I'r stores  en   Requisition   X".    12,   Raw   Materials,  Raw 

Hides,  37,632  lbs.  ("  25  cts.,  $9,408  On  Requisition  No.  13,  banning  Materials. 
$1,805.  On  Requisition  No.  -14.  Supplies  slim.  Water  used  in  process  for  the 
week,  $100.     (See  dan    I 

•  Ian.  15.     Paid  our  $5,000  uote  at  the  bank  by  giving  a  new  note  fo     - 
at  »i',    t'ni'  tin  days  and  our  check  For  $1,535  for  the  difference  and  the  interesl 
on   the    new    note. 

Jan.  Hi.  Received  $940.30  from  Hanson  Bros,  on  account  and  allowed  L"  , 
discounl  on  their  balance  $959.49.  Received  $7,938  from  Parker  &  l>a\is 
mi  accounl  and  allowed  them  l"  ,  discount,  which  pays  their  bill  of  Jan.  v 
in   mil. 

Jan.  17.     Paid   C.   K.   Porter  &   Co    $2,865  and   r ived   J',    discounl   on 

$2,953.61.    Paid  J.  C.  Harm's  &  Co.  $3,891  and  received  J',  discount  on  $4,011.34 


BOOKKEEPING  AND  ACCOUNTING  231 

Jan.  18.  Purchases :  Purchased  of  Wilson  &  Co.  Raw  Hides  on  account 
as  per  Invoice  No.  43,  43,672  lbs.  @  25  cts.,  3/15,  n/60,  $10,918,  Purchased 
of  Johnson  &  Murphy,  Tanning  Materials  on  account,  as  per  Invoice  No.  44, 
$2,100.  Purchased  of  Jones  &  Davis,  Supplies  on  account,  as  per  Invoice  No. 
45,  $750.  Received  bill  from  Powers  &  Lyons  for  $125  for  record  books  for 
factory  use,  Invoice  No.  46.  (Indirect  Expense.)  Received  bill  from  J.  C. 
Orr  &  Co.  for  advertising,  $350,  Invoice  No.  47.     (Jan.  3.) 

Jan.  18.  Sold  to  Sidney  Walker  &  Co.  10.473  lbs.  Sole  Leather  @  50  cts., 
2  15,  n/60.  Sold  to  II.  C.  Scheider  &  Co.  6.478  lbs.  Sole  Leather  @  50  cts., 
2/15,  n/30.    Sold  to  Duncan  Bros.  8,355  lbs.  Sole  Leather  @  50  cts.,  2/15,  n/30. 

Jan.  18.  Received  $1,617.58  from  L.  H.  Ames  &  Co.  on  account  and  allowed 
them  a  -' ,  discount.  Received  $2,500  from  Mehl  &  Levis  on  account  and  allowed 
them  2%  discount. 

Jan.  19.  Issued  from  Stores  on  Requisition  No.  45  Raw  Materials,  Raw 
Hides,  38.632  lbs.  @  25  cts.,  $9,658.  On  Requisition  No.  46,  Tanning  Materials, 
$1,875.  On  Requisition  No.  47,  Supplies,  $100.  Water  used  in  process,  $100. 
(Jan  4.) 

Jan.  19.  Paid  Swift  &  Co.  $2,500  on  account  and  they  allowed  us  3% 
discount. 

Jan.  20.  Paid  Payroll  for  the  week  $900,  including  labor  and  wages  of  Hie 
sales  force. 

Jan.  25.  Purchases:  Purchased  of  Swift  &  Co.  Raw  Hides  on  account, 
as  per  Invoice  No.  48,  45,696  lbs.  @  25  cts.,  3/15,  n/60,  $11,424.  Purchased 
of  J.  C.  Barnes  &  Co.  on  account  Tanning  Materials,  as  per  Invoice  No.  49, 
$2,300.  Purchased  of  Jones  &  Davis  on  account.  Supplies  as  per  Invoice  No. 
50,  $850.  Received  bill  from  Powers  &  Lyons  for  miscellaneous  articles  for 
use  in  factory,  Invoice  No.  51,  $125.  (Indirect  Expense.)  Received  bill  from 
J.  C.  Orr  &  Co.  for  miscellaneous  items  for  use  by  the  sales  force,  $350,  Invoice 
No.  52.     (Jan.  3.) 

Jan.  25.  Paid  J.  C.  Orr  &  Co.  $339.50  and  received  3%  discount.  Paid 
City  Water  Works  $400  on  account,  as  per  contract.    No  discount. 

Jan.  26.  Issued  from  stores  on  Requisition  No.  48  Raw  Materials,  Raw 
Hides,  36,632  lbs.  @  25  cts.,  $9,158.  On  Requisition  No.  49,  Tanning  Materials, 
$1,735.  On  Requisition  No.  50,  Supplies,  $100.  Water  used  in  process  for 
the  week,  $100.     (Same  as  Jan.  4.) 

Jan.  26.  Sold  to  Hanson  Bros.  7,275  lbs.  Sole  Leather  @  50  cts.,  2/15, 
n/60.    Sold  to  Morgan  &  Zion  9,275  lbs.  Sole  Leather  @  50  cts.,  2/15,  n/60. 

Jan.  26.  Received  $3,626  from  J.  D.  Ryan  &  Co.  on  account  and  allowed 
them  2','  discount.  Received  $4,410  from  Sidney  Walker  &  Co.  on  account 
and  allowed  them  2%  discount. 

Jan.  27.  Paid  Wilson  &  Co.  $6,305  on  account  and  received  3%  discount. 
Paid  Brown  Bros.  $125  on  account. 

Jan.  27.  Paid  Payroll  for  the  week,  $900.  including  the  wages  of  the  sales 
force. 

Jan.  28.  Sold  to  Parker  &  Davis  7,665  lbs.  Sole  Leather  @  50  cts.,  2  15. 
a  tio.    Sold  to  Brown  Shoe  Co.  7,935  lbs.  Sole  Leather  @  50  cts.,  2/15,  n/60. 

Jan.  31.  Post  the  books.  Rule  and  post  the  totals  of  the  Journal.  Pur- 
chases Book,  Sales  Book  and  the  Cash  Book. 

Jan.  31.  Prove  the  Sales  Ledger  with  Accounts  Receivable  account,  and 
prove  the  Purchases  Ledger  with  Accounts  Payable  account. 


232  BOOKKEEPING  AND  ACCOUNTING 

Jan.  31.    Inventories: 

Raw  Bides  $28,224.00 

Tanning  Materials  6,000.00 

Supplies    4,000.00 

Materials  in  Process  18,320.00 

Direcl  Lain,]-  in  Process 1,300.00 

[ndirecl  Expense  in  Process 1,172.50 

Finished  Goods  on  hand 4,1 .00 

Insurance  unexpired  1  in. 00 

Depreciation  on  plant  200.00 

Taxes  accrued  on  plant W.OO 

Jan.  31.  The  Depreciation  on  Machinery,  $200,  Insurance  expired  on  plant. 
$60,  the  Taxes  Accrued  on  plant,  $40,  and  Machinery  Repairs,  $112.50,  are 
charged  to  I mlii-et-t  Kxpense  account  (Journal  . 

Indirect   Expense   $412.50 

Reserve  Eoi   Dep.  on  Machinery 

Insurance  on  plant  i'.ii  imi 

Taxes   Accrued    40.00 

Machinery   Repairs    112.50 

Jan.  31.  The  Payroll  records  show  the  amount  paid  for  Direct  Labor  is 
$2,000,  the  amount  paid  for  indirect  labor  is  $600,  the  amount  paid  for  wages 
of  the  sales  force  is  sl.nuu.  Sec  form  of  Payroll,  Illustration  No.  98,  Paragraph 
226.) 

I ;1   Labor  $2,( 

[ndirecl    Expense  (labor) 600 

Selling  Expense  (sales  force) 1,000 

Payroll    $3,600 

To  distribute  the  Payroll  as  per  analysis  of  the  Payroll  records. 

Jan.  31.  The  cosl  records  show  the  value  of  the  materials  consumed  on 
the  product  completed  is  $41,572  which  less  the  sale  of  Offal  leaves  the  net 
cost  of  materials  consumed  $40,972.  Debit  Finished  Goods  account  $40,972 
for  the  cost  of  materials  used  in  completed  product,  and  credit  .Materials  in 
Process  account.)     Journal.     (See  paragraphs  235  to  238 

Jan.  31.  An  analysis  of  the  Payroll  records  shows  that  the  amount  of 
Dired  Labor  expended  on  the  completed  product  is  $1,874.  (Debil  Finished 
Goods  account,  $1,874  for  the  direct  labor  on  the  finished  product  and  credit 
Direct  Labor  account.  Paragraph  236-2.) 

Jan.  31.  An  analysis  of  the  indirect  expenses  show  the  amount  of  these 
expenses  that  are  apportioned  to  be  charged  to  the  completed  quantities  is 
$1,420.  (Debit  Finished  Goods  account,  $1,420  for  the  portion  of  indirect 
expense  to  be  charged  to  the  finished  product,  and  credit  Indirect  Expense 
account.    Paragraph  237. 

Note:    Tl bjeel  of  the  last  three  entries  is  to  establish  the  cost  of  the 

finished  product. 

Jan.  31.  The  costs  tabulated  from  orders  on  which  both  the  cost  and 
selling  price  is  entered,  show  the  "Cosl  of  Goods  Sold,"  the  "('est  of  Sales" 
to  be  $45,266.  (Debil  "Cosl  of  Sales"  ace, unit  $45,266,  and  credit  Finished 
( foods  account.    See  paragraph  239 

Jan.  31.  Balance  and  rule  and  total  the  Raw  Hides  Materials,  Tanning 
Materials.  Supplies,  Materials  in  Process,  Dired  Labor,  finished  Goods  and 
Indirect  Expense  accounts,  and  bring  these  balances  down  below  the  rulings 
on  the  debit  side  of  each  account. 

Compare  these  balances  with  the  physical  inventories  from  the  factory. 
They  should  be  the  same,  thus  showing  thai  these  accounts  control  the  materials 
and  the  other  factory  co-t   records.     Prepare  a  Trial   Balance. 


BOOKKEEPING  AND  ACCOUNTING  233 

•Ian.  31.     If  the  work  has  been  performed  correctly  to  this  point,  the  Trial 
Balance  before  closing  should  appear  as  follows: 

Trial  Balance  Before  Closing,  Valley  Tanning  Co.  January  31,  192 

1  Capital    $75,000.00 

2  Cash $13,828.88 

3  Notes  Receivable    5,750.00 

4  Accounts  Receivable   39.392.98 

5  Notes  Payable  8,500.00 

6  Accounts  Payable 48,343.68 

7  Insurance  1 40.00 

S  Plant  and  Machinery 20,000.00 

9  Reserve  for  Depreciation  on  Machinery 200.00 

10  Interest ' 35.00 

12  Taxes  Accrued    40.00 

13  Selling  Expense  2,400.00 

14  Purchases  Discount   576.82 

15  Sales  Discount 475.14 

16  Raw  Hides  Material  Inventory 28,224.00 

17  Tanning-  Materials  Inventory  6,000.00 

18  Supplies   Inventory    4,000.00 

19  Materials  in  Process  Inventory 18,320.00 

20  Direct  Labor  in  Process 1,300.00 

21  Indirect  Expense  in  Process 1,172.50 

22  Finished  Goods  Inventory   4,000.00 

23  Cost  of  Sales 45,266.00 

24  Sales    57,644.00 

$190,304.50     $190,304.50 


Jan.  31.  After  preparing  the  Balance  Sheet  and  Profit  and  Loss  State- 
ment, close  the  Nominal  accounts  into  Profit  and  Loss  account  and  close  the 
Profit  and  Loss  account  to  Surplus.  Prepare  the  Profit  and  Loss  Statement 
first,  and  show  the  surplus  in  the  Balance  Sheet. 

Closing  Journal  Entries 
Profit  and  Loss $45,266.00 

Cost  of  Sales $45,266.00 

Sales    $57,644.00 

Profit   and   Loss    $57,644.00 

Profit  and  Loss $2,910.14 

Interest $35.00 

Sales  Discount    475.14 

Selling  Expense    2,400.00 

Purchases  Discount   $576.82 

Profit  and  Loss $576.82 

Profit  and  Loss $*•••*•• 

Surplus $*****.*• 

To  close  the  Nominal  accounts.  In  posting  to  the  debit  and  credit  of  Profit 
and  Loss  account,  itemize  so  the  account  will  show  the  name  of  each  debit  and 
credit,  the  same  as  in  Illustration  No.  27. 

The  following  statement  of  the  manufacturing  operations  will  show,  in  the 
form  of  a  report,  the  same  facts  as  are  shown  by  the  accounts.  The  main  pur- 
pose of  this  simple  short  set  is  to  show  the  controlling  accounts,  that  is,  how 
these  accounts  are  used   to  control  the  operations  in  the  factory. 


234 


BOOKKEEPING  AND  ACCOUNTING 

Statement  of  Manufacturing  Operations 


Valley  Tanning  Co. 
Raw  Materials  Aoootints: 


Raw  Hides  Inventory,  Jan.  1  .  .  .  . 
Tanning  Materials  Inventory.  Jan.  1 
Supplies  Inventory,  Jan.  1   .... 


Materials  Furohased  during  Ferlod: 


Raw  HidOB    

Tanning  Materials  

Supplies    

Total  Cost  of  Materials 


Cost  of  Materials  Issued  and  put  in  Process: 


Raw  Hides   .  .  . 

Tanning  Materials 

Supplies   .... 

Total  Cost  .  . 


Inventory  of  Materials  on  hand  Jan.  31 
Represented  by: 

Haw  Hides   

Tanning  Materials   

Supplies   


Materials  In  Process  Aocount: 

Materials  in  Process  Inventory,  Jan.  1   .  . 
Cost  of  Materials  Requisitioned  for  Period 

Less  Cost  of  Materials  used  on  completer 
Trodnot  for  the  Period   

And  the  Sale  of  Offal    


Inventory  of  Materials  In  Process  Jan.  31   .  . 

Direct  Labor  Account : 

Inventory  Direct  Labor  in  Process,  Jan.  1  . 
Direct  Labor  on  work  In  Frocess  for  Period 
Less  Direct  Labor  on  Goods  Finished   .  .  . 
Inventory  of  Direot  Labor  in  Process  Jan. 31 

Finished  Goods  Acoount: 


Inventory  uoods  on  hand  Jan.  1   .  . 
Cost  of  Goods  oonpleter  for  period: 

Materials     

Direct  Labor  

Indirect  Expense  


Less  Cost  of  Goods  Sold  for  Period   .... 
Inventory  Finished  Coods,  Jan.  31   ... 

Indirect  Expense  Account: 


Inventory  of  Expenses  in  Process  .  . 
Indirect  Expense  for  Perioj  .  .  . 
Less  Indirect  Expense  Apportioned  to 

complete  product   

Inventory  of  Indirect  Expense  in 

Process,  Jan.  31   


20160 
4020 

1000 


45696 
9200 

3400 


37632 
7220 

400 


28224 
6000 
4000 


38224 


40972 
600 


1174 
2000 


5000 

40972 
18*74 
1420 


680 

1800 


00 


25180 


56296 


83476 


4!  2!  :. 


36224 


59892 


41572 


1 '.'  — 


3174 
1674 


1300 


19226 


45266 


■;c\v 


2480 
142^ 


1060 


00 


QQ. 


x 


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ILLUSTRATION  NO.  108.  STATEMENT  OF  OPERATIONS 


BOOKKEKl'ING  AND  ACCOUNTING 


235 


PROBLEM  19.     NATIONAL  MANUFACTURING  COMPANY 

Prom  the  following  Trial  Balance  of  the  Ledger  of  the  National  Manufac- 
turing Co.,  and  the  inventories  following  the  Trial  Balance,  set  up  the  Nominal 
accounts,  Reserve  accounts  and  Surplus,  on  Ledger  paper  and  close  the  accounts, 
showing  the  Manufacturing  Account,  Trading  Account,  Administrative 
Account,  Profit  and  Loss  Account  and  the  Appropriation  Account. 

The  journal  entries  suggested  provide  for  the  inventories,  the  additional 
reserves  and  dividend,  so  that  an  adjusted  or  Final  Trial  Balance  is  not  neces- 
sary, but  may  be  prepared.  The  Balance  Sheet  is  to  be  prepared  after  the 
closing  entries  arc  posted.  The  Profit  and  Loss  Statement  should  show  the 
distribution  of  the  profit  at  the  end. 

Trial  Balance,    national  Manufacturing  Co.    Deo.    31,    19 


1 
2 

3 

4 

5 

6 

7 

8 

S 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

26 

26 

27 

28 

29 

30 

31 

32 

33 

34 

36 

36 

37 

38 

39 

40 

41 

42 

43 

44 

45 

46 


Capital  Stook      

Unsubscribed  Stock    

Surplus : 

Cash        

notes   Receivable    

Aooounts  Receivable      

Notes  Payable.    Trade    

Notes  Payable,  Bank      

Accounts   Payable 

Buildings    (Factory]      

Maohinery 

Tools      

Reserve  for  Depreciation  on  Machinery 
Reserve  for  Depreciation,  on  Tools  .  . 
Reserve  for  Doubtful  Accounts  .... 
Raw  Materials  Inventory,  Jan.  1,  .  .  . 
Finished  Goods  Inventory,  Jan.  1,  .  . 
Materials   in  Process   Inventory,   Jan.    1, 

Raw  Material-Purchases    

Purchases  Returns  and  Allowances    .    .    . 

Freight  and  Cartage  In   

Heat,   Light  and  Power      

Labor-Payroll      ...    

Foremen's  Salary    ,    .    

Machinery  Repairs      

Faotor'y  Expenses    ."- 

Insuranoe  on  Factory    

Sales      

Sales  Returns  and  Allowances  

Sales  Discount 

Freight  Out   .  , 

Shipping  Expense  .  . 

Salesmen's  Commission   

Traveling  Expense   

Advertising  

Warehouse  Rent  

Insuranoe  on  Warehouse  

Office  Expense  

Office  Salaries   

Officer'9  Salaries  

Directors'  Fees   

Legal  Expense   ...  

Interest-Trade  

Interest-Bank- 

Collection  and  Exchange   

Purchases  Discount  


30000 

00 

10000 

00 

9000 

00 

14000 

00 

13000 

00 

20300 

00 

8800 

00 

21000 

00 

22000 

00 

10000 

00 

16000 

00 

2600 

00 

3000 

00 

600 

00 

500 

00 

3000 

00 

5000 

00 

1000 

00 

60000 

00 

2500 

00 

1200 

00 

2300 

00 

19200 

00 

2750 

00 

950 

00 

1000 

00 

500 

00 

121450 

00 

6500 

00 

1700 

00 

1300 

00 

2500 

00 

6300 

00 

2700 

00 

2200 

00 

2200 

00 

400 

00 

2250 

00 

2500 

00 

4000 

00 

300 

00 

150 

00 

250 

00 

1500 

00 

100 

00 

800 

00 

219650 

00 

219650 

00 

236  BOOKKEEPING  AND  ACCOUNTING 

It  the  sin, |,  ni  will  prepare  and  post  the  closing  journal  entries  as  8ug 
gested,  the  Nominal  accounts  will  be  closed,  the  accounts  mentioned  above  will 
appear  as  shown,  and  tin-  Reserve  accounts,  Unexpired  Insurance  on  Factory, 
Unexpired  Insurance  on  Warehouse,  Dividend  No.  1,  Payable  and  Surplus 
accounts  will  remain  open.  These  accounts  with  the  Assets,  Liabilities  and 
Capita]  Stock  accounts  will  appear  in  the  Balance  Sheel 

Inventories : 

Raw  materials  on  hand  Dec.  -'!1 $G..">00 

Materials  in  Process  Inventory  Dec.  31 4,500 

Finished  Goods  Inventory,  Dec   31 9,500 

Reserve  for   Dep.  on   Machinery 1,300 

Reserve    for    Dep.    OH   Tools 400 

Insurance  on   Factory  Unexpired   250 

Insurance  on   Warehouse  Unexpired   120 

The  board  of  directors  have  declared  a  20',  dividend  on  stock  issued.  It 
lias  been  decided  to  set  up  or  write  off  an  additional  Reserve  for  Doubtful 
Accounts  of  $1,600. 

An  analysis  of  the  Payroll  records  show  thai  $17,500  is  Direct  Labor  and 
$1,700  is  Indirecl  Labor  or  factory  Expense. 

CLOSING  JOURNAL  ENTRIES 

1.  Insurance  on   Factory   Unexpired $2.">0.00 

Insurance  on  Factory  $250.00 

To  transfer  the  Unexpired  Insurance  Prom  Insurance  on  Factory 

account  and  establish  the  amount  of  insurance  expired. 

2.  Insurance  on  Warehouse  Unexpired $120.00 

Insurance  on  Warehouse $120. 0t> 

3.  Direct  Labor   $17,500.00 

Factory  Expense  l.TOO.nu 

Payroll     $19,200.00 

To  dose  Payroll  account  and  distribute  the  wages  as  per  analysis 
of  Payroll  records. 

4.  Raw  Materials  Purchases   $3,000.00 

Raw  Materials   Inventory  Jan.   1 $3,000.00 

To  close  the  beginning  inventory  and  transfer  it  to  Raw  Mate- 
rials Purchases  with  a  view  to  ascertaining  the  cosl  of  Raw  .Materials 
used. 

Note:  These  explanations  are  longer  than  the  usual  explanation,  in  order  thai  they 
may  be  made  Buggestive.  Use  the  number  of  the  entry  as  the  page  of  the  Journal,  when 
posting.    All  of  these  journal  entries  should  be  dated  December  31. 

5.  Raw  Materials  Inventory.  Dee.  31 $6,500.00 

Purchases    Returns    and    Allowances 2,500.00 

Raw    Materials    Purchases    $!l.0(Hl  nn 

To   set    up   present    inventory    and    to   transfer    these    amounts    to 

Raw  Materials  Purchases  account,  as  deductions   Erom   the  cost   of 

materials,   with   a    view   to   establishing   the   cost    of   materials   used   in 
manufacture  for  the  period. 


BOOKKEEPING  AND  ACCOUNTING  237 

G.    Manufacturing   Account    $73,700.0(1 

Raw  Materials   Purchases   $54,000.00 

Materials  in  Process.  Jan.  1 1.000.00 

Freight  and  Cartage  In 1,200.00 

Direct  Labor  1 7,500.00 

To  set  up  the  Manufacturing  Account  to  show  the  "Manufacturing 
Cost,"  and  to  close  and  transfer  the  latter  accounts  to  it. 

Note:  In  posting  the  $73,700  to  the  debit  of  Manufacturing  Account,  itemize  it  on 
the  debit:  Raw  Materials  Purchases  $54,000,  Materials  in  Process,  Jan.  1,  $1,000,  Freight 
and  Cartage  In,  $1,1200,  Direct  Labor,  $17,500,  instead  of  posting  the  amount  in  one  sum. 

7.  Manufacturing  Account  $10,650.00 

Insurance  on  Factory  (expired) $250.00 

Machinery  Repairs    950.00 

Factory  Expense 2,700.00 

Heat,  Light  and  Power   2,300.00 

Foreman 's  Salary 2,750.00 

Depreciation  on  Machinery 1.300.00 

Depreciation  on  Tools 400.00 

To  close  these  accounts  into  Manufacturing  Account  with  a  view 
to  establishing  "Manufacturing  Cost." 

Note:  In  posting  the  $10,650  to  the  debit  of  Manufacturing  Account,  itemize  it  as 
explained  in  Number  6,  instead  of  posting  the  amount  in  one  sum. 

8.  Materials  in  Process,  Dec.  31 $4,500.00 

Manufacturing   Account    $4,500.00 

To  set  up  the  present  inventory  and  credit  Manufacturing 
Account  as  a  deduction  from  cost  of  materials,  with  a  view  to  arriving 
at  the  cost  of  materials  consumed. 

!).    Trading  Account   $79,850.00 

Manufacturing  Account   $79,850.00 

To  close  the  Manufacturing  Account,  showing  the  "Manufacturing 
Cost,"  and  to  set  up  the  Trading  Account  with  a  view  to  showing  the 
profit  on  sales. 

10.  Trading  Account    $5,000.00 

Finished  Goods  Inventory,  Jan.  1 $5,000.00 

To  close  the  beginning  inventory  and  transfer  it  to  the  Trading 
Account. 

11.  Finished  Goods  Inventory,  Dec.  31 $9,500.00 

Trading  Account    $9,500.00 

To  set  up  present  inventory  and  credit  Trading  Account  as  a 
deduction.  When  the  foregoing  entries  are  posted  to  this  point,  the 
Trading  Account  shows  the  "Cost  of  Goods  Sold"  or  "Tost  of  Sales." 


238  BOOKKEEPING  AND  ACCOUNTING 

12.  Trading  Account   $17,480.00 

Shipping   Expense   $2,500.00 

Freight  Out  1,300.00 

Salesmen's  Commission    6,300.00 

Traveling    Expense    2,700.00 

Advertising   2,200.00 

Warehouse  Renl  2,2< 

Insurance  on  Warehouse  (expired) 2Si » >  ■< ' 

T<»  close  these  selling  expenses  into  Trading  Account  with  a  view 
to  establishing  the  profil  in  trading  or  profil  on  sales 

Note:      in    posting   to   the  <lel>it   i.f  Trading    Account,  itemize  in   tl xplanation  column 

iggested  in  Numbers  r>  and  ~. 

13.  Sales    $8,200.00 

Sales  Returns  and  Allowances -     ".00.00 

Sales   Discounl    1.7oo.ou 

To  close  the  latter  accounts  into  Sales  a >unt  with  a  view  to 

establishing  the  net  sales. 

14.  Sales    $113,250.00 

Trading  Account   $113,250.00 

To  close  the  Sales  account  and  credit  the  trading  account  with 
the  net  sales. 

15.  Trading  Account  $20,420,00 

Administrative  Account    $20,420.00 

To  close  the  Trading  Account,  showing  the  "Profit  on  Sales," 
into  Administrative  Account. 

10.    Administrative    Account    $9,200.00 

Office  Expense $2,250.00 

Office  Salaries  2,500.00 

Officers'  Salaries 1,000.00 

Directors'  Fees 300.00 

Legal  Expenses   150.00 

To  close  those  administrative  expense  a  en  units  into  Administrative 
Account.  In  posting,  itemize  in  the  explanation  column  as  explained 
in  numbers  6  and  7. 

17.  Administrative  Account    $11,220.00 

Profit  and  Loss  Account $11,220.00 

To  close  Administrative  Account,  showing  the  cosl  of  administra- 
tion, into  Profit  and  Loss  account. 

18.  Profil    and    Loss   Account $1,850.00 

Interest— Trade    $250.00 

Interest— Hank    1,500.00 

Collection  &  Exchange 100.00 

To  close  these  i perating  expense  accounts  into  the  Profit  and 

Loss  Account,  as  deductions  from  income.     |  Itemize  when  posting.) 


BOOKKEEPING  AND  ACCOUNTING  239 

If).    Purchases  Discount   $800.00 

Profit  and  Loss  Account $800.00 

To  close  Purchases  Discount,  as  a  non-operating  income,  into 
Profit  and  Loss  account. 

20.  Profit  and  Loss  Account $10,170.00 

Appropriation  Account $10,170.00 

To  close  Profit  and  Loss  account  into  Appropriation  account,  to 
show  the  distribution  of  profits. 

21.  Appropriation   Account    $10,170.00 

Reserve  for  Doubtful  Accounts $1,000.00 

Dividend  No.  1.  Payable 4,000.00 

Surplus 4,570.00 

To  close  Appropriation  Account,  showing  distribution  of  profits, 
and  to  set  up  the  additional  Reserve  and  the  Dividend  Account,  and 
to  transfer  the  remainder  of  the  profits  to  the  Surplus  account. 
(Itemize  when  posting.) 

If  the  closing  entries  are  properly  posted,  the  Manufacturing  Account, 
Trading  Account,  Administrative  Account,  Profit  and  Loss  Account,  and  the 
Appropriation  Account  will  appear  as  follows,  but  the  student  will  have  to 
set  up  all  the  accounts  affected  and  post  the  closing  entries  in  order  to  be  able 
to  prepare  the  Balance  Sheet  to  show  the  condition  of  the  business  after  the 
books  are  closed  and  the  profits  are  distributed.  Prove  the  Balance  Sheet  with 
the  Profit  and  Loss  Statement. 


240 


BOOKKEEPING  AND  ACCOUNTING 

MANUFACTURING  ACCOUNT 


Dec.  31.  Raw  Materials  consumed ..  $54,000 

31.   Matt-rials  in  Pro 

lnvtv.,  Jan.  1 1, 

31.  Freight  and  Cartage  In. ..      I 

31.   I i    I  aboi  L7, 

31.  Heat,  Light  and  Power  ... 

31.  Foremen's  Salary 

31.  Machinery  Repairs 950 

31.  Factory  Expense 'J. 7"" 

31.    Insuran a  Factory 

rpired) 250 

31.    Depreciation  on   Machinery    $1,3110 

31.   I  >epre<  iation  on  Tools. . . .'.        400 


$84,350 


I.    Materials  in  Pr Invtv. 

Dec.  31    ..$   1,500 

31.  Manufacturing  Cost  to 

Trading  Account 79,850 


$84,350 


TRADING  ACCOUNT 


Dec. 

31. 

Manufacturing    Cost    from 

1  li  .     31.  Finished  (ion. is,  Invtv. 

M.n  ofacturing  acct.  . . . 

350 

Dec.  ;:i  

..$     9 

31. 

Finished  Goods   Invtv., 

5,000 

31.  Sales   

11 

31. 

rtage  Out. 

1,300 

31. 

Shipping   Bz  pense 

.     2,500 

31. 

Salesmen  's  Salary 

.     6,300 

31. 

Traveling   Expenses    .... 

.     2,700 

31. 

.      L',200 

31. 
31. 

2,200 

.$      280 

Insurance  on  Warehouse. 

31. 

Profit   in  Trading  to    li 
minis!  rath  e  Account.. 

.   20,420 

$122,750 

$122,750 

ADMINISTRATIVE  ACCOUNT 


Dee.   31.  Office  Expenses $  2,250 

31.  Office  Salaries 2,500 

31.  Officers '  Salaries 4,000 

31.  Directors'  Fees 300 

31.  Legal  Expenses 150 

i  Business    l'rolit     to    Profit 

and  Loss  Acct 11,220 


$20,420 


Dec.  31.   Profit      in     Trading     from 

Trading  Account   $20,420 


$20,420 


PROFIT  AND  LOSS  ACCOUNT 


Dei      :'     In'erest— Lank 1,500 

31.  lot'  resi     Trade    250 

31.  Collection  ami  Exchange..  100 
31.  Net     Profit    to    Appropria- 
tion Acct 10,170 

$12,020 


Pec.   31.   Business  Profit   from  Profit 

and  Loss  Act $11,220 

31.  Purchases  Miscount   800 


BOOKKEEPING  AND  ACCOUNTING 
APPROPRIATION  ACCOUNT 


241 


Dec.  31.  Reserve  for  Bad  Bebts $  1,600 

31.  Dividend  No.  1  Payable..     4,000 
31.  Surplus 4,570 


$10,170 


Dec.  31.  Net  Profit  from  Profit  and 

Loss  Acct $10,170 


$10,170 


Usually  the  debits  to  these  accounts  would  not  be  itemized  as  shown.  The 
large  amounts  that  have  been  itemized  would  ordinarily  be  posted  in  one  amount. 
The  purpose  in  requiring  that  these  accounts  be  posted  and  shown  as  above  is 
that  they  may  more  nearly  conform  to  the  Profit  and  Loss  Statement. 


PROFIT  AND  LOSS  STATEMENT,  NATIONAL  MANUFACTURING  CO.,  DEC.  31,  192 

Sales $121,450.00 

Sales  Returns  and  Allowances $6,500 

Sales  Discount  1,700  8,200.00 

Net  Sales $113,250.00 

Prime  Costs: 

Raw  Materials  Invty.  Jan.  1 $     3,000.00 

Materials  in  Process,  Invt.,  Jan. 1,000.00 

Raw  Materials  Purchases  for  Period 60,000.00 

Freight  and  Cartage  In   1,200.00 

Direct  Labor 17,500.00 

$82,700.00 
Less  Purchases  Returns  and  Allow.  .$2,500 
Less  Raw  Materials  Invty.,  Dec.  31. .   6,500 
Less  Materials  in  Process  Dee.  31 ... . .  4,500        13,500.00 

Prime  Cost   $  69,200.00 

Factory  Overhead : 

Heat  Light  and  Power $2,300 

Foremen's  Salary 2,750 

Machinery  Repairs 050 

Factory  Expenses 2,700 

Insurance  on  Factory 250 

Depreciation  on  Machinery 1,300 

Depreciation  on  Tools 400 

Factory  Overhead   10,650.00 

Manufacturing  Cost  for  period $  79,850.00 

Add  Finished  Goods  Invty.,  Jan.  1 .  .  5,000.00 

$  84,850.00 
Deduct    Finished    Goods    Inventory, 

Dec.  31 9,500.00 

( !ost  of  Sales  for  the  period $  75,350.00 

Cross  Profit  on  Sales,  Carried 

For'd    $  37,900.00 


242  BOOKKEEPING  AND  ACCOUNTING 

Gross    Profit   on    Sales    Brot.    Ford 37,:i00.00 

Selling  <  losl : 

Shipping  Expense $2,500.00 

Freight  I  tat  1.300.00 

Traveling  Expenses 2,700.00 

Salesmen's    Commission    6,300.00 

Advertising 2.200.00 

[nsurance  on  Warehouse 280.00 

Warehouse  Renl  2.200.00 

Selling  Expense 17.4so.oo 

Net  Profit  on  Sales $  20,420.00 

Administrative  Cost: 

<  Mice  Expense   $2,250.00 

(  M'iiee  Salaries    2,500.00 

Omeers'  Salaries 4,000.00 

Director  '  Pees 300.00 

Legal  Expense 150.00 

Cost  of  Administration   P. 200.00 

Profit  from  Operations $  11.220.00 

Deduct  Non-Operating  Expenses: 

Interest— Trade 250.00 

Interest— Bank    1,500.00 

Collection  and  Exchange 100.00 

Deductions  from  Income I.S.'hmxi 

$     0.370.00 

Add  Other  Income  : 

I  'urehases  Discount 800.00 

Net  Profit  *  10,170.00 

Distribution: 

Reserve  Eor  Doubtful  Accounts $1,600.00 

Dividend  No.  1  Payable 4.00H.OO  5,600.00 

Carried  to  Surplus  Account    $     4.570.00 

Prepare  a  Balance  sheet  and  prove  it  with  the  Profit  and  Loss  Statement. 
Compare  the  Profil  and  Loss  Statement  with  the  Manufacturing  Account. 
Trading  Account.  Administrative  Account.  Profit  and  Loss  Account,  and  Ap- 
propriation  Account.     The   Profil   and   Loss   statement   may   be   arranged   in 

sections,  in  the  technical   form,  to  conform  to  the  foregoing  five  accounts. 


Alphabetical  Index 


Table  of  Contents 


PAGES 

Abbreviations    2 

Acceptance    10 

Acceptance — Trade    10-138 

Accounting-,  Corporation 140 

Accounting,    Partnership 63-104 

Accounts  Closed 41 

Accounts,  Ledger 7-25-70-132 

Accounts  Payable 11-119 

Accounts  Receivable 11-119 

Accruals   30-32 

Accrued  Assets 30-32 

Accrued  Liabilities 30-32 

Adjusting  Journal  Entries 31-53 

Administrative  Account 240 

Administrative      Expense      Ac- 
count     12-28-73 

Admitting  a  Partner 91-92 

Analysis  Sheet  37 

Analyzing  Balance  Sheets 88 

Apportioning  Administrative  and 

Selling  Expense 223 

Apportioning  Indirect  Expense. 

221  to  226 

Appropriation  Account 241 

Assets  or  Resources 11-33-44 

Average  Investment.  Partners'.    106 

Balance  of  Account 25 

Balance  Sheets 34-35-88 

Bank  Balance,  Reconciliation.  .  .     85 

Bank  Pass  Book. ..'. 83 

Bank  Statement 84 

Bills  or  Invoices 78 

Bond  Issues 155 

Bonus  156 

Bookkeeping  and  Accounting.  .  .   137 

Books  of  Original  Entry 55 

Building  Account 92 

Building  Expense  and  Income. 28-197 
Business  Papers   9-77 

Capita]  or  Investment 4-11-25-63 

Capital  Accounts 4-25-63 

Capital  Stock  Account. .  .115-121-141 


PAGES 

Cash  Account 25 

Cash  Balance  25-58-85 

Cash  Book 58-59-128-129-164-165 

Cash  Journal 158 

Changing  to  a  Corporation. . .  147-1 48 

Checking    138 

Checks    80 

Check  Book 82 

Closing  Accrued  Asset,  Accrued 
Liabilities  and  Deferred 
Charges  to  Operation  Ac- 
counts       42 

Closing  Entries 39-42-76-236 

Closing  the  Ledger 38-75-76 

Closing  Partners'  Accounts... .  .69-70 

Closing  Procedure   41-77 

Closing  Proprietor's  Accounts..  25 
C.  O.  D.  Accounts  and  Shipments.  185 

Commercial  Papers 9-77 

Common  Stock 146 

Common  Capital  Stock 145-146 

Comparative  Balance  Sheets.  102-103 
Comparative  Statements  .  . .  .100-101 
Comparative     Profit     and     Loss 

Statements 103 

Consignee's  Record 183 

( Jonsignments   182 

Consignor's  Record 183 

Consolidation 149  to  154 

Contingent  Liability 95 

Contingent  Working  Capital .  143-144 
Controlling  Accounts — Manufac- 
turing  224-226 

Controlling  Accounts — Trading .    119 

Corporation  Accounting 140 

Cost  Accounting,  Part  1 209 

Cost  Accounting,  Part  II 214 

Cost  Sheet  or  Cost  Ledger 218 

Cost  of  Goods  Sold 226 

Cost  of  Sales 226 

Credit  Memorandum 78 

Creditors'  Accounts 119 

Creditors'  Ledger 119  and  136 

Current  Assets 89 


BOOKKEEPING   AND  ACCOUNTING 


PAGES 

stomers'  Accounts. . .  .119  and 
I  lustomers'  Ledger 119  and 

I  >ebi1  ami  ( Iredit,  Principles  of.  1  to  8 

I  >•  ductions  from  [ncome 36 

I  (eferred  Assets  

I  >eferred  Charges  to  <  Ipefation. 31-32 
Delivery  Equipmenl   Account.  .14-26 

Delivery  Expense  Account 14-28 

I  >epartmen1  ized  Business 18] 

Deposil  Tickets B3 

I  >epreciation,   Resen  e   For 31-32 

Detailed  Statements   37 

Diivet   Labor  220-225 

I  >iscoun1  and   Premium 155 

Dissolution  of  Partnership 109 

Distribution  of  Profits 100 

Dividends    156 

Dividend  Accounts 157 

Drafts 9-10 

Errors  in  Trial  Balance 138 

Exhibits   34 

Expense  Accounts 12 

Factory  Expense   22] 

Factory  Overhead 187-22] 

Final  Trial  Balance  before  •  Hos- 
ing    i!:!-."}!' 

Finished  G Is  Account 226 

Finished  Goods  Inventory 226 

Fiscal  Period 12 

Fixed  Assets 89 

FYeighl  In  Accounl 16  18-2'3 

Freighl  <  hit  Accounl 66  72 

Furniture  and  Fixtures  Accounl 
14-26 

Genera]   Column.  .  .58-59-128-129-130 

( reneral   Expense  1 2 

Genera]  Ledger.  .119  and  132  to   135 
G Iwill,  Value  of 110-11] 

Indirect  Expense 22]  225 

Indirect  Expense  Apportioned. .  22] 

Indirect  Labor 220  22] 

[ndorsemenl 81 

Insurance   16-2G 

rnteresi   17   !8 

Interest  on  [nvestmenl 1|N 

ln\  entories 30-3] 

[nventory  Accounts 26-41-72 

Invoice    77 

Invoice  of  Shipmen! 182-183 


I'AGES 

Journal    6  21-22  23  24 

Journal  Entries 6-21-22-23  24 

Journal,  Special  <  !olumn.  .  L58  to  161 

Land  Account    92 

lc  duer  Accounts 7-25-70 

Liabilities    11-33  1 1 

Loss  on  Doubtful  Accounts 32 

Manufacturing  Accounl  L'lu 

Manufacturing  Accounts 224 

Manufacturing  Business  ....192-227 
Manufacturing  <  !os1  for  Period. . 

L88-211-226 

Manufacturing    Cosl    oi    Goods 

Sold 188-211-226 

Manufacturing  Statements!  36  to  190 
Manufacturing  Statement  of  <  Op- 
erations         L'">  I 

Materials  R rd  218 

Materials  in  Process  Account. 217-225 
Materials  in  Process  Inventory.  .  225 
Merchandise  Accounts 12-33  11 

\'et  Capital  11 

Net  Proceeds 184 

Xct  Profit 42 

Non-Operating   Expense   Ac- 
counts    3(1 

Non-Operating     I  n  c  o  m  e     Ac- 
counts    118-188 

Notes :i 

Notes  Payable 10 

Notes  Receivable  1" 

Notes  Receivable  Discounted...  95 

i  Office  Equipment 14'Jn' 

<  Office  Equipmenl   Expense   .  17  65-73 

<  Opening  Entries ii-1 1-25-63-70 

Opening   Entries;  Corporation. . 

Ill  to  L45 

i  Opening  Entries,  Partnership. . .  104 

rating  Accounts 33 

Operating  Kxpenses — Profit  and 

Loss  Accounts 33 

Order  of  Posting 68 

Partners"  Capital  Accounts.  .4-70-106 
Partners'  Dn  ision  of  Profits. . . . 

69-106-107 

Partners'  Personal  Accounts...  4-70 

Partnership  Accounting  1"! 

Partnership,  Dissolution  of 109 

Partial  Payments  16-8] 


BOOKKEEPING  AND  ACCOUNTING 


FAGES 

Pass  Book 83 

Payroll  Account 220 

Payroll  Book 219 

Personal  Accounts 29 

Petty  Cash  Account 120-122 

Petty  Cash  Book 120 

Posting  .5-6-7-57  to  62  and  119  to  120 

Preferred  Stock 145-146 

Preferred  Capital  Stock 145-146 

Productive  Hours   222 

Productive  Labor 219-220 

Profit  and  Loss  Account 42-240 

Profit  and  Loss  Accounts 33-75 

Profit  and  Loss  Statement 36-53 

Proof  Trial  Balance 43 

Proprietors'  Capital  Account. 4-14-25 
Proprietors'  Personal  Account.4-14-25 

Purchases  Account 27-41 

Purchases  Book 57-126-196 

Purchases  Discount 27-41 

Purchases  Ledger 136 

Purchases    Returns    and    Allow- 
ances       15 

Raw  Materials  Account 216-234 

Real  Estate  Expense  and  Income.     28 

Receipt 78 

Reconciliation  of  Accounts  pay- 
able   ! .     38 

Reconciliation  of  Accounts  Re- 
ceivable         38 

Reconciliation  of  Administrative 

Expense   37 

Reconciliation  of  Bank  Balance.     85 
Reconciliation  of  Selling  Ex- 
pense       37 

Reserve  Accounts 30  to  33 

Reserve  for  Depreciation 30-31 

Reserve  for  Doubtful  Accounts. 30-31 

Requisition,  Form  of 220 

Rules 13 

Sales  Account 12-27-72 

Sales  Book 60-127-193 

Sales  Discount  41 

Sales  Ledger 135 

Sales  Returns  and  Allowances.  .      15 

Schedules   37-38 

Selling  Cost  118-211-242 


PAGES 

Selling  Expense 12-16-28 

Selling  Expense  Account. .  .28-73-135 

Shipments 182-183 

Shipping  Invoice 182-183 

Single  Entry  Bookkeeping 205 

Single  Entry  Changed  to  Double 

Entry 205-207 

Six  Column  Working  Sheet. .  .52-115 

Special  Columns 56 

Special  Column  Cash  Book 

58-59-194-195 

Special  Column  Journal 158 

Special  Column  Purchases  Book .   196 

Special  Column  Sales  Book 193 

Statement  of  Account 79 

Statements,  Corporation 113-118 

Statements,  Manufacturing.  .  .186-190 

Stores  Ledger 228 

Stores  Record 216 

Subscriptions 141-142 

Subsidiary  Ledgers 121 

Surplus 123 

T-Ledger  Accounts 64 

Terms  of  Sale 14 

Tickets,  Sale,  Credit  and  Collec- 
tion     167-168 

Trade  Acceptance   10-15-137 

Trading  Account 240 

Trading  Accounts 33-75 

Trading     Section  —  Profit     and 

Loss  Account 33 

Trading  Statement 44 

Treasury  Stock 143-144 

Trial  Balance   30 

Trial  Balances,  Errors  in 138 

Trial  Balance,  Pinal 33 

Trial  Balance,  Proof 43 

Turnover    162 

Unsubscribed  Stock 144-145 

Unit  Value  of  Article  from  Trial 
Balance 210 

Working  Capital   143 

Working  Capital,  Contingent.  143-144 
Working  Capital,  Suspense.  .143-144 

Work  in  Process 225 

Working   Sheet 52-115 


Illustration  of  Various  Forms 


PAGES 

1  to  S  Journal  Entry  Studies.  .  1  to  4 

9  Opening  Entry 4 

10  Journal   G 

11  Ledger  Accounts 7 

12-13  Trial  Balances 8 

14  Notes 9 

15  Sight  Draft 9 

16  Acceptance  10 

17  Trade  Acceptance       10 

18  Journal 21  to  24 

18a  Ledger  Accounts 25  to  29 

19  Trial  Balance 30 

20  Adjusting  Entries 31 

21  Final  Trial  Balance 33 

22  Balance  Sheet 34 

23  Balance  Sheet 35 

24  Profit  and  Loss  Statement  36 

25  Analysis  Sheet 37 

26  Schedules 38 

26a  Accounts  Closed   41 

27  Profit  and  Loss  Account .  42 

28  Closing  Entries  43 

29  Proof  Trial  Balance 44 

30  Trading  Statement 44 

31  Working  Sheet 52 

32  Profit  and  Loss  Statement  53 

33  Purchases  Book 57 

34  Debit  of  Cash  Book 58 

35  ( Iredit  of  Cash  Book 59 

36  Sales  Book   60-61 

37  Journal    62 

38  Ledger  Accounts   70-74 

39  Closing  Entries 76 

40  Invoice 77 

41  Credit  Memorandum  ....  78 

42  Receipt 78 

43  Statement  of  Account...  79 

44  Cashier's  Check 79 

45  Bank  Draft 80 

46  Personal  Check  80 

47  Check  Stub 82 

48-49  Deposit  Ticket 83 

50  Pass  Book 83 

51  Bank  Statement 84 


PAGES 

52  Balance  Sheets 88 

53  Balance  Sheets 89 

54  Comparative  Statement .  .  100 

55  Distribution  of  Profit 100 

56  Comparative  Statement.  .  101 

57  Comparative    Balance 

Sheet   102 

58  Opening  Entry  for  Part- 

nership      105 

59  Working  Sheet 115 

60  Balance  Sheet  for  Corpo- 

ration    117 

61  Profit  and  Loss  Statement 

for  Corporation 118 

61a  Petty  Cash  Book 120 

62  Purchases  Book 126 

63  Sales  Book   127 

64  Debit  of  Cash  Book 128 

65  Credit  of  Cash  Book 129 

66  Three  Column  Journal .  .  .  130 

67  Ledger  Accounts.  .132  to  137 

68  Balance  Sheet  for  Corpo- 

ration    154 

69  Special  Column  Journal.  159 

70  Special  Column  Journal.  160 

71  Special  Column  Journal.  161 

72  Three  Column  Journal.  .  .  163 

73  Debit  of  Cash  Book 1 04 

74  Credit  of  Cash  Book 165 

75  Charge  Tickets 167 

76  Cash  Tickets 168 

77  Credit  Tickets   169 

78  Collection  Tickets 170 

79  Account  Sales 184 

80  Final  Trial  Balance 186 

81  Profit  and  Loss  Statement 

for  Manufacturing.  187-188 

82  Balance  Sheet  for  Manu- 

facturing    189 

83  Special   Column   Sales 

Rook 193 

S4     Debit  of  Cash  Book  with 

Bank  <  'olumn 194 


BOOKKEEPING  AND  ACCOUNTING 


PAGES 

85     Credil  of  »  lash  Book  with 

Bank  Column 195 

36     S]  •■'  ial  I  lolumn  Purchases 

Book 196 

88  Single  Entry  Journal 205 

89  Balance  Sheet,  Single  En- 

try       207 

00  Entry  to  Change  to  Dou- 

ble Entry 207 

01  Trial  Balance 210 

92  Profit  and  Loss  State- 
ment, Manufacturing, 
Showing  Cnii  Cost.. 2]  1-212 


PAGES 

93  Stores  Record 216 

94  Requisition  <  (rder :M7 

95  Materials  Record 218 

96  Cosl  Sheet 218 

97  Summary  219 

98  Payroll  Book 220 

99  Distribution    of    [ndirecl 

Expense 222 

100    Distribution  Rate  of  Ex- 
penses      223 

lni     Distribution    of    Factory 

Overhead    '.   223 

102  stock  Record  228 

103  Statement  of  Operations.  234 


Accounting  Problems  Between  the  Sets 


PAI 

1  Assets  and  Liabilities 11 

2  Assets  and  Liabilities 12 

3  Trading  Statemenl 44 

4  Trading  Statemenl 44 

.">     Detailed  Statements 51 

6  Working  Sheet    52-53 

7  Detailed   Statements   75 

8  Method  of  Closing 75  76 

9  Closing  Books,  Partnership.     86 

10  Detailed   Statements 101 

11  Comparative  Statement  ... .   103 

12  ( 'losing  t  he  Books,  Partner 

ship  Hi' 

13  Working    Sheel    and   State- 

ments for  a  Corporation.  .    11") 


PAGES 

II     Detailed  Statements  and 

Schedules 1:'>7 

15  Manufacturing  Statements. 

186  190 

16  O.  C.  Nelson  Manufacturing 

Co 190 

17  .Mead     Bicycle     Co.,     I'nit 

Cost    209-212 

18  Illinois    Coal     Mining     Co., 

I'nit  Cos!    213 

19  Closing  Entries  to  show  the 

Manufacl  uring     Account, 
Trading  Account,  Admin- 
istrative   Account,    Profit 
and  Loss  Accounl  and  Ap 
propriation   Account.  .235-242 


V*   • 


483125 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


